Unaudited prelim results for year end 31 Dec 2019

RNS Number : 7802U

Gama Aviation PLC

31 July 2020

 

Date: 31^st July 2020

This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) No 596/2014

Gama Aviation Plc (AIM: GMAA)

("Gama" or "the Group" or "the Company")

Unaudited preliminary results for the year ended 31 December 2019

Financial Highlights (2019 on a pre IFRS 16 basis, comparatives restated)

· Revenue $246.8m (2018: $234.9m), up 5%, at constant currency up 8% ¹ .

· Gross Profit $39.3m (2018: $44.5m), down 12%, at constant currency down by 9% ¹ .

· Gross Profit Margin 15.9% (2018:18.9%), down 3.0ppts, at constant currency down by 3.1ppts ¹ .

· Adjusted EBIT $3.3m (2018: $8.4m), down 61%, at constant currency down by 61% ¹ .

· Net Debt, stated on a pre IFRS 16 basis, increased to $37.8m (post IFRS 16 $98.0m) from $2.5m at 31 December 2018.

· No dividend recommended in view of COVID-19 uncertainties (2018: 2 pence per share).

Financial Summary

	Adjusted 2 $m				Statutory $m
	Dec-19 Post-IFRS 16	Dec-19 Pre-IFRS 163	Dec-18 Restated 4		Dec-19	Dec-18 Restated 4
Continuing operations:
Revenue	246.8	246.8	234.9		246.8	234.9
Gross Profit	39.5	39.3	44.5		39.5	44.5
Gross Profit %	16.0%	15.9%	18.9%		16.0%	18.9%
EBIT	5.6	3.3	8.4		(7.0)	(34.0)
Profit / (Loss) Before Tax	1.6	2.3	8.3		(11.0)	(34.2)
Earnings per share (cents)	0.7	1.8	11.3		(18.2)	(57.5)

Notes:

¹ To aid comparability 2018 results have also been calculated on a constant currency basis.  This has been calculated using a constant foreign exchange rate of $1.28 to £1, being the cumulative average USD-GBP exchange rate for 2019 instead of the reported exchange rate of $1.34 to £1 for 2018. On a constant currency basis, 2018 Revenue is $227.9m, Gross Profit is $43.2m, Gross Profit percentage is 19.0% and Adjusted EBIT is $8.3m.

² The Alternative Performance Measures (APMs) Adjusted Earnings before interest and tax (Adjusted EBIT), Organic Revenue and Net Debt are defined in Note 2 of the notes to the financial statements and reconciled to the nearest IFRS measure in Note 6 and Note 28 to the financial statements.

³ The Group adopted IFRS 16 from 1 January 2019 and the 2018 comparatives are not restated for IFRS 16. To achieve year on year comparability of the results, Adjusted EBIT, Gross Profit, Profit / (loss) before Tax and earning per share have been presented on a pre IFRS 16 basis for 2019 (consistent with the presentation for 2018) as well as on a post IFRS 16 basis. The impact of IFRS 16 on the 2019 results were to increase Gross Profit by $0.2m, increase Adjusted EBIT by $2.3m, decrease Adjusted Profit before Tax by $0.7m and reduce Earnings per Share by 1.1 cents per share.

⁴ Restatements are detailed in Note 2 of the notes to the financial statements

Operational Highlights

· Air Division stable with solid performance in special mission contracts.

· Revenue growth in Ground Division offset by increased costs.

· Special mission contract performance remained strong with contractual KPIs achieved on all major contracts.

· Middle East and Asia regions continue to be challenging.

· Myairops delivering software sales growth however FlyerTech impacted by reduced revenues partly due to Brexit concerns.

· Executive team strengthened by the appointment of new CFO Daniel Ruback in December 2019.

Outlook

As was most recently communicated on 23^rd June, activity levels in certain parts of the Group have been impacted by the COVID-19 pandemic.  Underlying trading in Q2 has progressed in line with management's revised assumptions on cost containment, cash preservation measures and maintaining contracted revenue streams. An exception to this is the performance of the Group's Hong Kong based associate, China Aircraft Services Limited, in which the Group owns a 20% equity stake, which has suffered significant losses in 2020 as a direct result of COVID-19 related reduced volumes. The Group continues to make use of all available government sponsored assistance measures in all regions, including the $5.75m forgivable loan received under the US Paycheck Protection Program (part of the CARES Act). 

Given the continuing operational and financial uncertainties resulting from the COVID-19 pandemic, the Group's financial guidance for the year ending 31st December 2020 remains suspended.

Meanwhile, the Group's liquidity position remains strong with c$17m of cash and c$29m of its $50m revolving credit facilities available to draw down.

Marwan Khalek, Chief Executive Officer said:

" While we achieved solid organic revenue growth in 2019, profit margins were adversely affected by a highly competitive market environment and by continuing challenges within our finance function.  With the onset of the Coronavirus pandemic at the start of this year and the ensuing global lockdowns significantly curtailing the demand for air travel, our 2020 performance has also been impacted.  

T he Group benefits from operating to a resilient and robust business model which includes recurring revenues from long standing government and other contracts providing the Group with mitigation against the impact of the downturn in activity levels by maintaining critical revenue flows .  These, together with strong levels of liquidity, stand the Group in good stead.  Meanwhile, we have not been standing still.  In December, we appointed a new CFO, Daniel Ruback, with a clear mandate to strengthen and transform the Group's finance function which he is diligently implementing. We continue to attract new business into our maintenance facilities, and we have secured a number of new special mission contracts. 

Clearly, at this stage, with the uncertainties surrounding this evolving pandemic it is difficult to predict how soon the demand for air travel will resume. However, when it does, the business aviation sector is expected to benefit disproportionately from a drift to this more secure and private form of air travel.  The Group is well positioned to weather this COVID-19 induced economic downturn, to capture the resulting opportunities and to emerge stronger from it."

-ENDS-

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

For further information please visit  www.gamaaviation.com  or contact:

Gama Aviation Plc Marwan Khalek, Chief Executive Officer Daniel Ruback, Chief Financial Officer	[phone]
Camarco Ginny Pulbrook Geoffrey Pelham-Lane	[phone]
Jefferies International   Simon Hardy  Will Soutar	[phone]

Gama Aviation - Notes to Editors

Gama Aviation Plc (AIM:GMAA) is a global business aviation services group that specialises in providing support for individuals, corporations and government agencies; allowing them to deliver on the promises they make.  

The Group's services are split into two core divisions: Air and Ground. Air services include aircraft management, special mission support and charter.  Ground services cover aircraft maintenance services, aircraft modification design and installation, and Fixed Base Operations (FBO).  Other products and services are included in the Global Services Division.

More details can be found at:  http://www.gamaaviation.com/

Chief Executive Officer's Report

The market environment throughout 2019 was very challenging and highly competitive across all of our operating divisions and regions.  By maintaining focus on our core business and continuing to provide a suite of services that are relevant to our customers' needs, we delivered solid revenue growth.  This was driven largely by organic growth in our US Ground division and by Special Mission contract wins. However, overall, the conversion of this solid top line revenue performance into Adjusted EBIT has been disappointing.

Growth opportunities through strategic and value enhancing acquisitions have been limited by the quality and pricing of available targets.  This has frustrated our plans to scale up our operations across some divisions leaving us with a sub-optimal cost base, both regionally and centrally, with the corresponding adverse impact on margins and Adjusted EBIT.

Our efforts to strengthen and improve the effectiveness of the finance function and control environment were hampered by the absence, for an eight-month period between May and December, of a Group CFO to lead the required transformation.  This was compounded by further churn in the senior finance team and the relocation of our HQ in the USA.  Consequently, the business was deprived of direction from the finance leadership that is essential to optimise operational and financial performance. As a result, the Group was slow in identifying and implementing necessary cost reductions to mitigate margin erosion.

Following the appointment of Daniel Ruback as CFO in December 2019, together with a new Group Financial Controller and other senior finance staff in 2020, the Group's finance team now has the skills, experience and leadership necessary to deliver the transformation program and to provide much needed partnering and support to the business.  I am confident that Daniel and his team will bring the necessary focus, stability, financial disciplines and controls that will help ensure the Group's financial performance again reflects the strong fundamentals of the business.

Strategy

The Group is currently undertaking a strategic review in the light of our performance and developments in the marketplace in recent years. Following a dispassionate assessment of our achievements and of the challenges we have experienced in executing the existing strategy (of increasing depth, breadth and scale), we are now developing an updated strategy to underpin our business planning for the next three years. The revised strategy will be finalised and communicated in the coming months, and will include a sharper focus on the opportunities with the greatest potential for value creation, where the Group has established capability and competitive advantage in the largest business aviation markets. Alongside defined growth imperatives will be a sustained emphasis on controlling and leveraging costs and investments globally, supported by increasingly robust business systems and processes.

COVID-19 Response

The Company continues to monitor this evolving pandemic carefully to ensure its response remains effective.  Our prime concern will always be the health and well-being of our global workforce and the clients we serve, and we continue to adhere strictly to all national government guidelines.  The Group's Global Leadership Team holds regular calls to review the latest developments and update its policies, procedures and controls in response to the evolving pandemic.

All our divisions remain operational, as they have been throughout this pandemic, delivering services in support of our clients' missions, particularly for those delivering critical services such as NHS Scotland, the Ministry of Defence and other government agencies.

During this period, the Group has maintained a strong focus on preserving cash in particular by eliminating discretionary spend where possible and increasing our focus on the close management of accounts receivable balances.

Outlook

As was most recently communicated on 23^rd June, activity levels in certain parts of the Group have been impacted by the COVID-19 pandemic.  Underlying trading in Q2 has progressed in line with management's revised assumptions on cost containment and cash preservation measures and maintaining contracted revenue streams. An exception to this is the performance of the Group's Hong Kong based associate, China Aircraft Services Limited, in which the Group owns a 20% equity stake, which has suffered significant losses in 2020 as a direct result of COVID-19 related reduced volumes. The Group continues to make use of all available government sponsored assistance measures in all regions, including the $5.75m forgivable loan received under the US Paycheck Protection Program (part of the CARES Act). 

Given the continuing operational and financial uncertainties resulting from the COVID-19 pandemic, the Group's financial guidance for the year ending 31st December 2020 remains suspended.

Meanwhile, the Group's liquidity position remains strong with c$17m of cash and c$29m of its $50m revolving credit facilities available to draw down.

The Group benefits from operating to a resilient and robust business model whereby recurring revenues are derived from long standing contracts.  This, together with diligent management and operation of the business, will allow the Group to maintain its strong liquidity position through this crisis. 

Therefore, the Board believes that the Group is well positioned to capture new opportunities, such as the recent wins of the Jersey and Guernsey Air Ambulance contracts, to emerge out of this crisis in a stronger position.

Marwan Khalek

Chief Executive Officer

Group Operational Performance

Revenue

USD'000s

		2019	2018 Restated*
Air Division		140,623	135,365
Ground Division		102,967	95,545
Global Services Division		3,223	3,949
Total		246,813	234,859

Gross Profit

USD'000s

	2019 (Post-IFRS 16)	2019 (Pre-IFRS 16)	2018 Restated* (Pre-IFRS 16)
Air Division	12,947	12,837	15,938
Ground Division	24,131	24,050	25,868
Global Services Division	2,395	2,395	2,662
Total	39,473	39,282	44,468

Adjusted EBIT

USD'000s

	2019 (Post-IFRS 16)	2019 (Pre-IFRS 16)	2018 Restated* (Pre-IFRS 16)
Air Division	4,482	4,072	4,045
Ground Division	6,862	4,962	7,573
Global Services Division	686	689	1,253
Associates Division	918	918	566
Central Costs	(7,383)	(7,377)	(5,024)
Total	5,565	3,264	8,413

Statutory EBIT

USD'000s

		2019 (Post-IFRS 16)	2018 Restated* (Pre-IFRS 16)
Air Division		2,278	(28,234)
Ground Division		748	3,570
Global Services Division		325	1,132
Associates Division		918	566
Central Costs		(11,271)	(11,022)
Total		(7,002)	(33,988)

*Restatements are detailed in Note 2 of the notes to the financial statements

Operational Performance Review

Air Division

The Air Division provides global outsource services to customers using business aviation as an integral part of their mission, including corporations and public services such as air ambulance and aerial survey. It provides aircraft management, crewing, charter services, airworthiness and engineering oversight both to single aircraft operations and fleets, and delivers substantial special mission contracts for complex, time critical services.

Adjusted EBIT - pre IFRS 16

USD'000s

	US		Europe		Middle East		Asia		Total
	2019	2018	2019	2018	2019	2018*	2019	2018*	2019	2018*
Revenue	4,050	4,921	99,145	88,804	16,778	20,966	20,650	20,674	140,623	135,365
Gross Profit	4,050	4,997	6,050	7,527	1,519	2,223	1,218	1,191	12,837	15,938
GP %	100%	102%	6%	8%	9%	(11%)	6%	6%	9%	12%
EBIT	3,898	4,892	622	186	(571)	(1,361)	123	328	4,072	4,045
EBIT %	96%	99%	1%	0%	(3%)	(6%)	1%	2%	3%	3%

*Restatements are detailed in Note 2 of the notes to the financial statements

Total Air Division revenue was $140.6m, representing growth of $5.2m (+4%) on last years $135.4m. This was mainly driven by a strong top-line performance in Europe Air, which increased by $10.3m partly due to a new UK special mission contract won in 2018, offset by weaker revenues in the other regions, particularly Middle East which fell by $4.2m due to reduced flight activity impacted by political challenges in the region. In addition, US revenues fell by $(0.9)m due to a one-off impact in the prior year relating to a branding fee termination agreement. US revenue includes $3.8m (2018: $3.8m) of licensing revenue and a $0.3m (2018: nil) modification gain in relation to a branding agreement.

Total Air Division Gross Profit was impacted by increases in direct costs (offset by overhead savings) and the impact from the prior year branding fee in the US. Total Air Division Adjusted EBIT was flat, with increased profit in Europe and reduced losses in the Middle East offset by profit reductions in the US (down by $(1.0)m) and Asia (down by $(0.2)m). The profit improvement in Europe by $0.4m to $0.6m was supported by a reduced loss allowance for doubtful debts and tighter management of costs. Losses in the Middle East reduced from $(1.4)m to $(0.6)m due to lower levels of funding of the start-up business in Saudi Arabia.

Special mission contract performance remained strong with contractual KPIs achieved on all major contracts, including the new five-year UK special mission contract won in late 2018, which commenced live operations on time in H2 2019. In addition, the in-sourcing by Europe Air of the helicopter emergency medical services (HEMS) for the Scottish Ambulance Service progressed according to plan, leading to the successful go-live of this operation on 1st June 2020.

Adjustments to EBIT

USD'000s

		US		Europe		Middle East		Asia		Total
		2019	2018	2019	2018	2019	2018	2019	2018*	2019	2018*
Exceptional items		(250)	(3,600)	(2,072)	(846)	134	(27)	(16)	(57)	(2,204)	(4,530)
Amortisation		-	-	-	(334)	-	-	-	-	-	(334)
Impairment charges		-	-	-	(24,915)	-	-	-	(3,486)	-	(28,401)
Profit on step acquisition		-	-	-	-	-	-	-	986	-	986
Application of IFRS 16		-	-	396	-	-	-	14	-	410	-
Total adjustments		(250)	(3,600)	(1,676)	(26,095)	134	(27)	(2)	(2,557)	(1,794)	(32,279)
Discontinued operations*		-	-	-	(807)	-	-	-	-	-	(807)

*The effects of discontinued operations are shown on a single line on the face of the consolidated income statement. This effect is included already within the statutory result shown below and is split out in the table above to aid understanding.

Statutory EBIT

USD'000s

	US		Europe		Middle East		Asia		Total
	2019	2018	2019	2018	2019	2018*	2019	2018*	2019	2018*
EBIT	3,648	1,292	(1,054)	(25,909)	(437)	(1,388)	121	(2,229)	2,278	(28,234)
EBIT %	90%	26%	(1%)	(29%)	(3%)	(7%)	1%	(11%)	2%	(21%)

*Restatements are detailed in Note 2 of the notes to the financial statements

Air Division Statutory EBIT increased from a loss of $28.2m in 2018 to a profit of $2.3m in 2019. In addition to the movements discussed above, the key items impacting profit in 2018 were impairments of $24.9m in Europe and $3.5m in Asia in 2018 that did not recur in 2019; a decrease in exceptional items from $4.5m in 2018 to $2.2m in 2019, most significantly in the US; and a profit on the step acquisition of Gama Aviation Hutchison Holdings Ltd of $1.0m in Asia in 2018 that did not recur in 2019.

Ground Division

The Ground Division provides global support to the business aviation, air ambulance, law enforcement and military sectors, deploying a service mix that is designed to deliver new capability and maintain availability of the aircraft to the operator. With a global network and increasingly rare independence from manufacturer ownership, the Division maintains all the necessary approvals to maintain aircraft from Gulfstream, Dassault Falcon, Bombardier, Embraer and Textron, providing heavy, ad-hoc and emergency maintenance as well as modifications and refurbishments.

Adjusted EBIT - pre IFRS 16

USD'000s

	US		Europe		Middle East		Asia		Total
	2019	2018	2019	2018*	2019	2018	2019	2018*	2019	2018*
Revenue	48,943	37,517	48,176	52,301	4,372	4,636	1,476	1,091	102,967	95,545
Gross Profit	6,360	8,101	15,605	15,720	1,453	1,374	632	673	24,050	25,868
GP %	13%	22%	32%	30%	33%	30%	43%	62%	23%	27%
EBIT	(268)	1,887	6,247	6,146	(466)	(342)	(551)	(118)	4,962	7,573
EBIT %	(1%)	5%	13%	12%	(11%)	(7%)	(37%)	(11%)	5%	8%

The Ground Division grew revenues by 8% to $103.0m (2018: $95.5m), resulting from continued organic growth in the US (30% growth to $48.9m) and Asia (35% growth to $1.5m) offset by reductions in Europe (8% down to $48.2m, or 3% down on a constant currency basis) and Middle East (6% down to $4.4m). In the US, the revenue growth was driven by major fleet customers including a new 'service hub' contract for a major private jet operator along with strong retail sales at our network of line maintenance stations. In Asia, growth was achieved through the Business Jet Maintenance Collaboration (BJMC) agreement with China Aircraft Services Limited (CASL) as expected. In the Middle East, FBO movements slightly reduced from 2018 with a knock-on effect on MRO revenues, while parking and hangarage remained close to capacity.

Adjusted EBIT fell by 34% to $5.0m, primarily due to an Adjusted EBIT loss in the US of $(0.3)m (2018: profit of $1.9m) as a result of start-up losses and poor gross margin performance at the Florida Paint Shop, a loss allowance for doubtful debt with a fleet operator no longer trading, growth in operational management costs, and revenue shortfalls associated with the separation and divestment of the US Air business. These factors were exacerbated by financial reporting deficiencies following a major transition of the US finance team, resulting in the business being slow to identify adjustments required to the cost base. In Europe Gross Profit was maintained, supported by increased productivity associated with the new Bournemouth facility. The Middle East and Asia businesses were impacted by increased overheads, principally ground rent on the Business Aviation Centre in Sharjah and additional overheads in Asia as a result of increased rent for a new office and a strengthened management team.

Adjustments to EBIT

USD'000s

		US		Europe		Middle East		Asia		Total
		2019	2018	2019	2018	2019	2018	2019	2018	2019	2018
Exceptional items		(657)	(6)	(4,891)	(2,630)	-	2	(26)	-	(5,574)	(2,634)
Amortisation		-	(633)	-	(113)	-	(273)	-	(350)	-	(1,369)
Impairment charges		(540)	-	-	-	-	-	-	-	(540)	-
Application of IFRS 16		538	-	1,169	-	193	-	-	-	1,900	-
Total adjustments		(659)	(639)	(3,722)	(2,743)	193	(271)	(26)	(350)	(4,214)	(4,003)

Statutory EBIT

USD'000s

	US		Europe		Middle East		Asia		Total
	2019	2018	2019	2018*	2019	2018	2019	2018*	2019	2018*
EBIT	(927)	1,248	2,525	3,403	(273)	(613)	(577)	(468)	748	3,570
EBIT %	(2%)	3%	5%	7%	(6%)	(13%)	(39%)	(43%)	1%	4%

*Restatements are detailed in Note 2 of the notes to the financial statements

Ground division Statutory EBIT fell from a profit of $3.6m in 2018 to a profit of $0.7m in 2019. In addition to the movements discussed above, the key items impacting profit in 2019 were an increase in exceptional costs in Europe from $2.6m in 2018 to $4.9m in 2019; impairment charges in the US in 2019 of $0.5m for which there was no equivalent cost in 2018; and an increase in statutory EBIT of $1.9m in 2019 as a result of the impact of the adoption of IFRS 16.

Global Services

The Global Services Division comprises two businesses, FlyerTech and myairops. FlyerTech provides continuing airworthiness management (CAM) and airworthiness review certification (ARC) services for business aviation and commercial airline operators. Myairops has developed a suite of business aviation products deployed as "Software as a Service" (SaaS) and mobile app solutions for business aviation operators, flight support companies, FBOs and regional airports.

Adjusted EBIT - pre IFRS 16

USD'000s

	Total
	2019	2018
Revenue	3,223	3,949
Gross Profit	2,395	2,662
GP %	74%	67%
EBIT	689	1,253
EBIT %	21%	32%

After a relatively weak first half year, overall divisional performance in the second half year has improved significantly over the first half, resulting in full year revenues of $3.2m (2018: $3.9m) and EBIT of $0.7m (2018: $1.3m).

FlyerTech continues to generate healthy profit margins but results were impacted by the loss of CAM and ARC revenues from airline customers who ceased operations and by the loss of CAM work partly in relation to Brexit-related concerns from existing and prospective European customers in relation to European Aviation Safety Agency (EASA) accreditations.

Myairops revenues and gross profits have grown significantly as sales of the new SaaS products have outstripped the phasing out of enhancement and support work on legacy "on premise" installations. Amortisation of product development investment has also increased significantly as new products have been launched, but EBIT has nevertheless improved. Market interest in the new products remains high with the true cloud capability of myairops offering strong differentiation.

Adjustments to EBIT

USD'000s

	Total
	2019	2018
Exceptional items	(45)	(121)
Amortisation	(316)	-
Application of IFRS 16	(3)	-
Total adjustments	(364)	(121)

Statutory EBIT

USD'000s

	Total
	2019	2018
EBIT	325	1,132
EBIT %	10%	29%

Global services Statutory EBIT fell from a profit of $1.1m in 2018 to a profit of $0.3m in 2019. In addition to the movements discussed above, statutory EBIT in 2019 also included amortisation of $0.3m in respect of software for which there was no equivalent amount in 2018.

Associate Investments

The US Air associate was sold after the end of the reporting period, see note 34 of the notes to the financial statements for further details.

Overall, associate Adjusted EBIT increased from $0.6m in 2018 to $0.9m in 2019, with improvements in both China Aircraft Services Limited (CASL) and the US Air Associate.

Adjusted and Statutory EBIT

USD'000s

	US Air Associate		China Aircraft Services Ltd		Total
	2019	2018	2019	2018	2019	2018
EBIT	518	359	400	207	918	566

Chief Financial Officer Report

The 2019 year end process has been challenging, being significantly disrupted by COVID-19 and the related adjustments required to the normal ways of working. In addition, the effect of a significant amount of change in the finance function, primarily in respect of people, processes and systems, has caused additional challenge. Furthermore, in 2019 the Group changed auditors from Grant Thornton UK LLP to PricewaterhouseCoopers LLP. 

As was disclosed in a recent market update, following my arrival in December 2019 a number of initiatives had been planned to strengthen and enhance the finance function and the Group's accounting and financial reporting systems and processes. Unfortunately, these were significantly impeded and delayed by the impact of COVID-19. However, I am pleased to say that over the past weeks progress has been made in enhancing the strength of the finance team with several new appointments already in place and making a positive impact.

Progress in strengthening the financial processes, procedures and controls has also now started to accelerate. As an example, an enhanced governance and reporting framework has been implemented in parts of the Group to better manage customer collections, an area of challenge in certain areas of the business in recent years. In addition, system enhancements have been made, and continue to be made, to increase automation and reduce the quantum of manual intervention and reconciliations required between operational and financial systems. This should improve the timeliness and accuracy of management information.

The remainder of 2020 and beyond into 2021 will continue to see the Group working diligently through an improvement plan, focusing on reviewing, reassessing and revising processes, procedures and controls to position the Group with a strong platform to take advantage of its future growth and operational efficiency aspirations.

Strengthening the financial processes, procedures and controls remains a key priority for the Board. This will support and enhance the solid financing platform now available to the Group.  In November a new $50m revolving credit facility was secured with HSBC and more recently in February a £20m loan was secured with HSBC to provide financing for three new Airbus H145 helicopters, purchased to strengthen the Group's position in the Helicopter Emergency Medical Service market.

	Adjusted 1 $m				Statutory $m
	Dec-19 Post-IFRS 16	Dec-19 Pre-IFRS 162	Dec-18 Restated 3		Dec-19	Dec-18 Restated 3
Continuing operations:
Revenue	246.8	246.8	234.9		246.8	234.9
Gross Profit	39.5	39.3	44.5		39.5	44.5
Gross Profit %	16.0%	15.9%	18.9%		16.0%	18.9%
EBIT	5.6	3.3	8.4		(7.0)	(34.0)
Profit / (Loss) Before Tax	1.6	2.3	8.3		(11.0)	(34.2)
Earnings per share (cents)	0.7	1.8	11.3		(18.2)	(57.5)

Notes:

¹ The Alternative Performance Measures (APMs) Adjusted Earnings before interest and tax (Adjusted EBIT), Organic Revenue and Net Debt are defined in Note 2 of the notes to the financial statements and reconciled to the nearest IFRS measure in Note 6 and Note 28 to the financial statements.

² The Group adopted IFRS 16 from 1 January 2019 and the 2018 comparatives are not restated for IFRS 16. To achieve year on year comparability of the results, Adjusted EBIT, Gross Profit, Profit / (loss) before Tax and earning per share have been presented on a pre IFRS 16 basis for 2019 (consistent with the presentation for 2018) as well as on a post IFRS 16 basis. The impact of IFRS 16 on the 2019 results were to increase Gross Profit by $0.2m, increase Adjusted EBIT by $2.3m, decrease Adjusted Profit before Tax by $0.7m and reduce Earnings per Share by 1.1 cents per share.

³ Restatements are detailed in Note 2 of the notes to the financial statements

Revenue Bridge

Revenue - 2018 (restated)2	234.9
Impact of foreign exchange movements	(7.0)
Revenue - 2018 at 2019 exchange rate 1	227.9
Acquisition of Florida Paint-Shop	2.3
Air Division	9.5
Ground Division	7.7
Global Services Division	(0.6)
Revenue - 2019	246.8

Notes:

¹ The Alternative Performance Measures ('APMs) are defined in Note 2 of the notes to the financial statements and reconciled to the nearest IFRS measure in Note 6. Constant currency calculations using a constant foreign exchange rate of $1.28 to £1, being the cumulative average USD-GBP exchange rate for 2019 instead of the reported exchange rate of $1.34 to £1 for 2018. On a constant currency basis, 2018 Revenue is $227.9m, Gross Profit is $43.2m, Gross Profit percentage is 19.0% and Adjusted EBIT is $8.3m.

² Restatements are detailed in Note 2 of the notes to the financial statements

· Air Division was mainly driven by a strong performance in Europe Air, which increased partly as a result of the new UK special mission contract won in 2018, offset by weaker revenues in the other regions, particularly Middle East which fell by $4.2m due to reduced flight activity impacted by political challenges in the region.

· The Ground Division grew revenues by 8% to $103.0m (2018: $95.5m), resulting from continued growth in the US (30% growth to $48.9m) and Asia (35% growth to $1.5m) offset by reductions in Europe (8% down to $48.2m, or 3% down on a constant currency basis) and Middle East (6% down to $4.4m).

· Global Services revenue fell by $0.6m following a weak first half.

Adjusted EBIT Bridge

Adjusted EBIT - 2018 (restated)1	8.4
Decrease in gross profit	(5.2)
Increase in administrative expenses	(0.2)
- Decrease in impairment of financial assets	0.4
- Increase in depreciation and amortisation	(0.9)
- Increase in inventory obsolescence	(2.9)
- Decrease in other administrative expenses	3.2
Increase in associates	0.3
Adjusted EBIT - 2019	3.3

¹ Restatements are detailed in Note 2 of the notes to the financial statements.

· The impact of the application of IFRS 16 is set out in further detail in Note 23 of the notes to the financial statements. The Adjusted EBIT bridge is pre-IFRS 16 and excludes the impact of IFRS 16 on adjusted gross profit of $0.2m, on administrative expenses of $2.1m and on EBIT of $2.3m.

· Gross profit is down by ($5.2m) because of a fall of $3.1m in Air, $1.8m in Ground and $0.3m in Global Services. Further detail is provided in the operational review.

· The loss allowance for impairment of financial assets decreased by $0.4m to $0.4m (2018: $0.8m).

· Depreciation and amortisation of $3.5m is up by ($0.9m) from the $2.6m reported in the prior year. This includes increased depreciation of $0.3m on fixtures, fittings and equipment related to office moves and $0.4m increased amortisation of software on internally developed software costs arising in myairops as well as purchased software, relating to operational and financial systems.

· Inventory obsolescence increased due to $1.4m write-down in Europe Ground in line with the accounting policy set out in Note 2 of the financial statements, $0.4m write-down in US Ground to measure inventories at the lower of cost or net realisable value and $1.1m write-back in the prior year.

· Associates are up following increased profit in both China Aircraft Services Limited (CASL) and Gama Aviation LLC year on year.

Statutory EBIT Bridge

Statutory EBIT - 2018 (restated)1	(34.0)
Impact of application of IFRS 16	2.3
Decrease in adjusted EBIT as tabulated above	(5.1)
Decrease in exceptional costs	1.7
- Decrease in exceptional transaction costs	3.5
- Increase in impairment of right-of-use asset	(2.4)
- Decrease in other exceptional items	0.6
Increase in share-based payment expense	(0.3)
Decrease in acquired intangible amortisation	1.5
Decrease in profit on step acquisition	(1.0)
Decrease in goodwill and intangible impairment	27.9
Statutory EBIT - 2019	(7.0)

¹ Restatements are detailed in Note 2 of the notes to the financial statements.

· The fall in exceptional costs is largely due to significant transaction costs of $3.5m in the prior year, partially offset by $2.4m impairment of the right of use asset associated with the Fairoaks lease. Note 6 of the notes to the financial statements provides further detail on other movements in exceptional items year on year.

· Share based payment is up following reduced forfeitures year on year.

· Amortisation of acquired intangibles is $1.5m lower following changes in useful lives in the prior year and as well as significant impairment of acquired intangibles in the prior year.

· The prior year impairment of goodwill and acquired intangibles of $28.4m comprises $18.3m of goodwill in Europe Air, $2.8m goodwill on Gama Aviation Hutchison Holdings Ltd (GAHH) in Asia Air and $7.3m impairment of acquired customer relationship intangibles comprising $2.8m on GAHH in Asia Air and $4.5m in Europe Air. In the current year $0.5m of acquired intangibles relating to the acquisition of the Florida Paint-Shop have been impaired.

Interest

There is a net interest charge for the period of $4.0m (2018: charge of $0.2m). The increase in the charge is as a result of $3.1m discounting on lease liabilities following the application of IFRS 16 and $0.6m of loan arrangement fees upon refinancing. Interest on borrowings remains in line with prior year at $1.0m.

Taxation

There is a total tax charge for the period of $0.5m (2018: charge of $0.5m). The Group operates across a number

of jurisdictions and the effective rate of tax reflects the blended rate of operating in different countries.

Earnings per share (EPS) and adjusted earnings per share

While shares in issue remain unchanged year on year, the weighted average number of shares in issue has increased from 60.3m to 63.6m shares due to the share issue on 2 March 2018 weighting more heavily on 2019 than the prior year.

The fall in adjusted EPS from 11.3c to 0.7c includes the reduction in adjusted EBIT referred to earlier (7.8c), the adverse impact of shares in issue referred to above (0.3c), increased finance costs as a result of the write-off of existing arrangement fees on refinancing (0.6c) and the application of IFRS 16 (1.1c).

The loss per share improved from 57.5c to 18.2c, primarily due to the impairment of goodwill and intangibles impacting prior year EPS by 43.1c.

Net debt and cash flow movements

	Dec-19	Dec-18 Restated1
Statutory EBIT (continuing and discontinued operations)	(7.0)	(34.0)
Non-cash components of EBIT	23.3	31.9
Net movement in working capital excluding Contribution to US Air Associate	(13.6)	(12.1)
Contribution to US Air Associate	-	(3.6)
Gama International Saudi Arabia ("GISA") operation startup funding	-	(1.0)
Taxes paid	(1.0)	(1.6)
Net cash expended on operating activities	1.7	(20.4)
Lease payments	(14.0)	-
Pre-IFRS 16 net operating cash flow	(12.3)	(20.4)
Capital expenditure net of disposals	(18.2)	(7.1)
Investment in China Aircraft Services Limited	-	(16.0)
Step-acquisition of Gama Aviation Hutchison Holdings	-	(2.6)
Acquisition of subsidiary, net of cash acquired	(1.3)	-
Issuance of shares (net of share issue costs)	-	63.7
Net interest paid	(0.9)	(0.9)
Dividend paid to equity holders of the parent	(1.6)	(2.3)
Net cash from/(used in) investing and financing activities	(22.0)	34.8
(Increase)/ decrease in net debt	(34.3)	14.4
Net debt at the beginning of year	(2.5)	(18.0)
Movement in capitalised arrangement fees	0.3	0.4
Application of IFRS 16 resulting in Obligations under leases	(60.2)	-
Effect of foreign exchange rates and other non-cash movements	(1.3)	0.7
Net debt at the end of year	(98.0)	(2.5)

Analysis of net debt	Dec-19	Dec-18 Restated1
Cash	8.4	10.0
Borrowings	(46.2)	(12.5)
Net Debt pre IFRS 16	(37.8)	(2.5)
Leases	(60.2)	-
Net debt at the end of year	(98.0)	(2.5)

¹ Restatements are detailed in Note 2 of the notes to the financial statements

· Refinancing completed on 14 November 2019, providing a new $50.0m revolving credit facility.

· Operating cash outflow pre-IFRS 16 decreased from $20.4m to $12.3m, due to improvement in working capital with the exception of collections on receivables, which is being actively addressed.

· Capex of $18.2m comprises, $8.4m down payment on helicopters, $3.1m on software predominately in myairops, $2.3m investment in Sharjah, $2.3m Furniture, Fittings & Equipment, $1.1m Aircraft & hull refurbishment and $0.8m leasehold improvement.

· On 10 January 2019, the Group acquired a paint and interior completion business previously operated by Lotus Aviation Group at Fort Lauderdale Executive Airport ("Paint-Shop") for $1.3m.

· $14.0m of lease payments include $5.5m for helicopters, which will end in 2020 following the insourcing and purchase of helicopters, $1.9m on aircraft in Europe Air, $2.6m in Europe Ground on hangars and facilities, and $3.7m in US Ground on facilities.

· Net Debt increased by $35.3m, as a result of increased Borrowings, including the initial funding for the three Helicopters for helicopter emergency medical services (HEMS) to support the Scottish Ambulance Service. In addition, on application of IFRS 16 obligation under leases of $60.2m have been included in net debt.

Dividend

Given the desirability of conserving cash during the ongoing COVID-19 pandemic, the Board does not recommend a dividend for 2019 (2018: 2.0 pence per share).

Litigation

The Group was previously involved in legal proceedings relating to historic Hangar 8 trading activity prior to the merger in January 2015 and relating to disputes with SPC Aviation Limited. The Company reached an agreement with SPC Aviation Limited to settle the legal proceedings between the parties on 9 December 2019 under the terms of a settlement agreement which was in full and final settlement of the court proceedings between the parties.

Following the settlement of the disputes with SPC Aviation Limited, the remaining proceedings in which the Company and a number of its subsidiaries are parties relate to disputes where the Company and its subsidiaries are claimants.

The Company has issued proceedings to recover long-standing trade receivables that amount to approximately $3m. The Company has made adequate provisions against these claims and as a result the Board does not expect any further provisions will be required.

Daniel Ruback

Chief Financial Officer

Gama Aviation Plc
Unaudited Consolidated income statement
For the year ended 31 December 2019

		Year ended 31 December 2019 (Unaudited)			Year ended 31 December 2018 Restated*
	Note	Statutory $'000	Adjusting items $'000	Adjusted result $'000	Statutory $'000	Adjusting items $'000	Adjusted result $,000
Continuing operations:
Revenue	4	246,813	-	246,813	234,859	-	234,859
Cost of sales		(207,340)	-	(207,340)	(190,391)	-	(190,391)
Gross profit	4	39,473	-	39,473	44,468	-	44,468
- Other administrative expenses		(39,268)	9,033	(30,235)	(45,706)	12,502	(33,204)
- impairment loss	6	(540)	540	-	(28,401)	28,401	-
- depreciation and amortisation	5	(5,198)	984	(4,214)	(5,067)	2,484	(2,583)
- impairment of financial assets	20	(2,387)	2,010	(377)	(834)	-	(834)
Total administrative expenses		(47,393)	12,567	(34,826)	(80,008)	43,387	(36,621)
Operating (loss)/profit		(7,920)	12,567	4,647	(35,540)	43,387	7,847
Share of results from equity accounted investments	18	918	-	918	566	-	566
Profit on step acquisition	13	-	-	-	986	(986)	-
Earnings before interest and taxation	4,5	(7,002)	12,567	5,565	(33,988)	42,401	8,413
Finance income	9	695	-	695	787	-	787
Finance expense	10	(4,657)	-	(4,657)	(954)	-	(954)
(Loss)/profit before tax from continuing operations		(10,964)	12,567	1,603	(34,155)	42,401	8,246
Taxation	11	(495)	(577)	(1,072)	(549)	(890)	(1,439)
(Loss)/profit after tax from continuing operations		(11,459)	11,990	531	(34,704)	41,511	6,807
Discontinued operations:
Loss after tax for the year from discontinued operations	7	-	-	-	(767)	-	(767)
(Loss)/profit for the year		(11,459)	11,990	531	(35,471)	41,511	6,040
Attributable to:
Owners of the Company		(11,554)	11,990	436	(35,485)	41,529	6,044
Non-controlling interests	26	95	-	95	14	(18)	(4)
Continuing EPS attributable to the equity holders of the parent
basic	12	(18.2c)	18.9c	0.7c	(57.5c)	68.8c	11.3c
diluted	12	(18.2c)	18.9c	0.7c	(57.5c)	68.7 c	11.2c
Total EPS attributable to the equity holders of the parent
basic	12	(18.2c)	18.9c	0.7c	(58.8c)	68.8c	10.0c
diluted	12	(18.2c)	18.9c	0.7c	(58.8c)	68.8c	10.0c

* Restatements are detailed in Note 2 of the notes to the financial statements

Gama Aviation Plc
Unaudited Consolidated statement of comprehensive income
For the year ended 31 December 2019

	Note	Year ended 2019 Unaudited $'000	Year ended 2018 Restated* $'000
Loss for the year		(11,459)	(35,471)
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations		(1,160)	(7,258)
Share of other comprehensive income of associates	18	36	-
Other comprehensive loss		(1,124)	(7,258)
Total comprehensive loss for the year		(12,583)	(42,729)
Total comprehensive loss is attributable to:
Owners of the Company		(12,678)	(42,743)
Non-controlling interest		95	14
		(12,583)	(42,729)

*Restatements are detailed in Note 2 of the notes to the financial statements  

Gama Aviation Plc
Unaudited Consolidated balance sheet
As at 31 December 2019

	Note	2019 Unaudited $'000	2018 Restated* $'000
Non-current assets
Goodwill	14	21,750	20,114
Other intangible assets	15	10,148	8,355
Total intangible assets		31,898	28,469
Property, plant and equipment	16	35,324	22,248
Right-of-use assets	23	52,315	-
Investments accounted for using equity method	18	15,112	18,287
Trade and other receivables	20	4,392	-
Deferred tax asset	22	2,252	1,926
		141,293	70,930
Current assets
Assets held for sale	18,34	2,598	-
Inventories	19	7,271	7,238
Trade and other receivables	20	73,505	58,833
Cash and cash equivalents		8,463	10,045
		91,837	76,116
Total assets		233,130	147,046
Current liabilities
Trade and other payables	24	(51,596)	(48,596)
Obligations under leases	23	(16,366)	-
Provisions	30	(521)	-
Borrowings	21	(45,615)	(11,135)
Deferred revenue	33	(2,867)	(6,231)
		(116,965)	(65,962)
Total assets less current liabilities		116,165	81,084
Non-current liabilities
Borrowings	21	(627)	(1,387)
Deferred revenue	33	(4,553)	-
Provisions	30	(594)	-
Obligations under leases	23	(43,838)	-
Deferred tax liabilities	22	(819)	(621)
		(50,431)	(2,008)
Total liabilities		(167,396)	(67,970)
Net assets		65,734	79,076
Shareholders' equity
Share capital	25	953	953
Share premium	25	63,473	63,473
Other reserves	25	34,798	33,937
Foreign exchange reserve		(29,179)	(28,055)
Accumulated (loss)/profit		(5,062)	8,112
Total shareholders' equity		64,983	78,420
Non-controlling interest	26	751	656
Total equity		65,734	79,076

*Restatements are detailed in Note 2 of the notes to the financial statements

Gama Aviation Plc
Unaudited Consolidated statement of changes in equity
For the year ended 31 December 2019

	Share capital $'000	Share premium $'000	Other reserves $'000	Foreign exchange reserve $'000	Accumulated profit/ (losses) $'000	Total shareholders' equity $'000	Non-controlling interest $'000	Total equity $'000
Balance at 31 December 2017 as reported	684	-	61,699	(20,797)	16,734	58,320	1,524	59,844
Restatement*	-	-	-	-	768	768	(882)	(114)
Balance at 1 January 2018 as restated	684	-	61,699	(20,797)	17,502	59,088	642	59,730
Loss for the year, as reported	-	-	-	-	(33,082)	(33,082)	14	(33,068)
Restatement*	-	-	-	-	(2,403)	(2,403)	-	(2,403)
Loss for the year, as restated	-	-	-	-	(35,485)	(35,485)	14	(35,471)
Other comprehensive loss, as reported	-	-	-	(7,218)	-	(7,218)	-	(7,218)
Restatement*	-	-	-	(40)	-	(40)	-	(40)
Other comprehensive loss as restated	-	-	-	(7,258)	-	(7,258)	-	(7,258)
Total comprehensive loss for the year	-	-	-	(7,258)	(35,485)	(42,743)	14	(42,729)
Issuance of shares	269	63,473	-	-	-	63,742	-	63,742
Utilisation of merger reserve, restated*	-	-	(28,401)	-	28,401	-	-	-
Cost of share-based payments (restated)*	-	-	639	-	-	639	-	639
Dividend paid	-	-	-	-	(2,306)	(2,306)	-	(2,306)
Balance at 31 December 2018, as restated	953	63,473	33,937	(28,055)	8,112	78,420	656	79,076
Loss for the year	-	-	-	-	(11,554)	(11,554)	95	(11,459)
Other comprehensive income	-	-	-	(1,124)	-	(1,124)	-	(1,124)
Total comprehensive loss for the year	-	-	-	(1,124)	(11,554)	(12,678)	95	(12,583)
Cost of share-based payments	-	-	861	-	-	861	-	861
Dividend paid	-	-	-	-	(1,620)	(1,620)	-	(1,620)
Balance at 31 December 2019	953	63,473	34,798	(29,179)	(5,062)	64,983	751	65,734

*Restatements are detailed in Note 2 of the notes to the financial statements

Gama Aviation Plc
Unaudited Consolidated cash flow statement
For the year ended 31 December 2019

	Note	Year ended 2019 Unaudited $'000	Year ended 2018 Restated* $'000
Net cash expended on by operating activities	27	1,695	(20,392)
Cash flows from investing activities
Purchases of property, plant and equipment		(15,053)	(5,425)
Purchases of intangibles		(3,093)	(3,171)
Proceeds on disposal of assets held for sale		-	1,500
Purchase of interest in associate		-	(16,000)
Acquisition of subsidiary, net of cash acquired		(1,310)	(2,590)
Net cash used in investing activities		(19,456)	(25,686)
Cash flows from financing activities
Issue of shares (net of share issue costs)		-	63,742
Consideration for acquisition of non-controlling interest		-	-
Lease payments	23	(14,062)	(611)
Interest received		2	-
Interest paid		(901)	(954)
Proceeds from borrowings	28	65,563	10,304
Repayment of borrowings	28	(32,915)	(35,680)
Dividend paid to equity holders of the parent	36	(1,620)	(2,306)
Net cash from financing activities		16,067	34,495
Net decrease in cash and cash equivalents		(1,694)	(11,583)
Cash and cash equivalents at the beginning of year		10,045	22,349
Effect of foreign exchange rates		112	(721)
Cash and cash equivalents at the end of year		8,463	10,045

Cash and cash equivalents		2019 $'000	2018 $'000
Cash and bank balances		8,463	10,045

*Restatements are detailed in Note 2 of the notes to the financial statements  

Cash and cash equivalents comprise cash and bank balances. The carrying amount of these assets is approximately equal to their fair value.

Gama Aviation Plc
Unaudited notes to the consolidated financial statements
For the year ended 31 December 2019

1. General information

Gama Aviation Plc is a public company limited by shares, incorporated in the United Kingdom. The address of the registered office has changed from "Business Aviation Centre, Farnborough Airport, Hampshire, GU14 6XA" to "1st Floor, 25 Templer Avenue, Farnborough, Hampshire, England, GU14 6FE" in the first half of 2020. The nature of the Group's operations and its principal activities are set out in the directors' report.

Basis of preparation

The unaudited preliminary results (referred to as the 'preliminary results') include the results of the Company and its subsidiaries (together referred to as the 'Group'). The preliminary results of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union (EU) and with the Companies Act 2006 applicable to companies reporting under IFRS.

The information for the year ended 31 December 2019 does not constitute statutory accounts for the purposes of section 435 of the Companies Act 2006. A copy of the accounts for the year ended 31 December 2018 was delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006. The audit of the statutory accounts for the year ended 31 December 2019 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the Directors in this 'preliminary results' and will be delivered to the Registrar of Companies following the Company's annual general meeting.

The preliminary results are prepared under the historical cost convention. The same accounting policies, presentation and methods of computation are followed in the 'preliminary results' as were applied in the Group's 2018 annual audited financial statements, with the exception of any changes arising from new IFRS standards and amendments and IFRS IC interpretations as adopted by the European Union effective from 1 January 2019 and related presentational changes, and the change in accounting policy to present foreign exchange gains and losses on borrowings within finance income / expense. The comparative amounts for the year ended 31 December 2018 have been restated for a number of items which are discussed in more detail in note 2 below.

2. Accounting policies

Restatements

The financial statements for 2018 have been restated for several items. The impact of restatements on the loss for the year and net assets is tabulated below:

	Reference	Adjusted EBIT $'000	(Loss)/ profit for the year Statutory $'000	Net assets $'000
As reported		11,327	(33,068)	81,664
Consolidation of GISA	i	(1,511)	(1,511)	(1,625)
Accruals for administrative expenses	iii	(274)	(274)	(284)
Recognition employee benefit trust receivable	iii	(349)	(349)	(360)
Measurement of share-based payments	iii	-	32	-
Revision to goodwill impairment following recognition of deferred tax on acquired intangibles	vii	-	(693)	(693)
Inventory recognition and measurement	ii	(580)	(580)	(598)
Foreign exchange gains on borrowings reclassified to finance income	vi	(201)	-	-
Exchange differences on translation of foreign operations in other comprehensive income		-	-	(47)
Other		1	-	47
Deferred tax		-	972	972
As restated		8,413	(35,471)	79,076

Further details on the restatements are as follows:

i.  As communicated in the interim results for the six months to 30 June 2019, the results of Gama International Saudi Arabia ('GISA'), following the correction of an accounting assessment under IFRS 10, have been consolidated. There has been no change to the legal status or ownership of that entity. The impact on the income statement is a charge of $1,511k, comprised of $27k on cost of sales, $1,506k on administrative expenses and partially offset by $22k credit on revenue. The impact on the balance sheet comprises, $1,568k reduction in trade and other receivables, $83k reduction in trade and other creditors, $25k increase in cash and $114k reduction in opening retained earnings. In addition, headcount has been restated for the four employees in GISA and staff costs of $662k. A full 2017 balance sheet is not practicable to present however the impact of consolidating GISA at 1 January 2018 was a decrease in net assets of $114k.

ii.  Errors in inventory recognition and measurement resulting in a charge of $580k to cost of sales and an equivalent reduction in inventory.

iii.  Errors in the parent company and consolidated financial statements on accruing for administrative expenses, resulting in a charge to administrative expenses of $274k and an equivalent increase in accruals. In addition there was a $349k write-off of a receivable from an employee benefit trust, partially offset by a $32k credit on the share based payment charge shown in exceptionals.

iv.  Following a review of mapping to financial statement line items in the current year and prior year, balance sheet reclassifications on accrued income ($2,852k increase), inventory ($2,852k decrease), accounts payable ($1,896k decrease), deferred revenue ($1,896k increase), assets under the course of construction ($1,815k increase), leasehold properties ($1,815k decrease), finance lease liability ($3,056k decrease) and borrowings ($3,056k increase) have been reflected.

v.  The $28,401k impairment of goodwill and intangibles in the prior year has been reclassified against the merger reserve rather than retained earnings. This restatement is consistent with the equivalent restatement made in the parent company. In addition, Loan arrangement fees of $384k have been capitalised against borrowings and reclassified out of prepayments.

vi.  Change in accounting policy to reflect foreign currency fluctuations on borrowings out of administrative expenses and into finance income, resulting in a $201k charge to administrative expenses and equivalent increase in finance income.

vii.  A restatement on step acquisition of the remaining 50% in Gama Aviation Hutchison Holdings Ltd (GAHH) has been made to reflect deferred tax liabilities of $693k on the acquired intangibles at acquisition date, which results in an equivalent increase in Goodwill. As previously reported, the goodwill of $2,063k was impaired at 31 December 2018. As a result, the impairment charge has been increased on recognition of acquired deferred tax liabilities of $693k.

viii. The opening balance of the non-controlling interest in Note 26 and the Statement of Changes in Equity has been restated by $882k, with an equivalent adjustment to retained earnings. This arises following a recalculation of the sole non-controlling interest's share of net assets at that point in time.

ix.  Tax disclosure errors have been restated in note 11, for a reclassification of $2,918k between the origination of tax losses and effect of tax rates in different jurisdictions. In addition, in Note 22 Deferred tax, a reclassification of $1,363k has been made between fixed asset temporary differences and tax losses.

x.  Asia Ground and Asia Air have been restated for an incorrect allocation of revenues and costs between these divisions in the second half of 2018. The impact of the restatement on profit or loss for Asia Ground is as follows; $586k increase in revenue, $583k increase in gross profit and $61k increase in EBIT in the second half of 2018. There is an equal and opposite impact on Asia Air.

xi.  In Note 27, unrealised foreign exchange movements have been restated and moved into cash flows from working capital movements. Within working capital movements, the change in inventory obsolescence and loss allowance for receivables have been presented separately from the movement in gross inventories and gross receivables respectively. In addition, interest paid of $954k has been restated from operating cash flows to financing cash flows.

Adoption of new and revised standards

New and amended standards adopted by the Group.

The group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 January 2019:

· IFRS 16 Leases

· Interpretation 23 Uncertainty over Income Tax Treatments.

· Prepayment Features with Negative Compensation - Amendments to IFRS 9

· Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28

· Annual Improvements to IFRS Standards 2015 - 2017 Cycle - Amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23

· Plan Amendment, Curtailment or Settlement - Amendments to IAS 19

The group also elected to adopt the following amendments early:

· Definition of Material - Amendments to IAS 1 and IAS 8.

Other than IFRS 16, which is described in further detail in note 23, the amendments listed above did not have any impact on the amounts recognised in the current or prior periods, nor are expected to significantly affect future periods.

IFRS 16 'Leases'

The Group initially applied IFRS 16 Leases from 1 January 2019. The Group applied IFRS 16 using the modified retrospective approach, where the right-of-use asset equals the lease liability at 1 January 2019. Accordingly, the comparative information presented for 2018 is not restated - i.e. it is presented, as previously reported, under IAS 17 and related interpretations. The details of the changes in accounting policies are disclosed below. Additionally, the disclosure requirements in IFRS 16 have not generally been applied to comparative information.

A. Definition of a lease

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

· the contract involves the use of an identified asset - this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;

· the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

· the Group has the right to direct the use of the asset. The Group has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Group has the right to direct the use of the asset if either:

o  the Group has the right to operate the asset; or

o  the Group designed the asset in a way that predetermines how and for what purpose it will be used.

This policy is applied to contracts entered into, or changed, on or after 1 January 2019. The practical expedient not to reassess whether contracts contain a lease has been used.

At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices . However, for the leases of land and buildings in which it is a lessee, the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

B. As a lessee

As a lessee, the Group leases many assets including aircraft, hangars, property, cars and IT equipment. The Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Group. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most of these leases - i.e. these leases are on-balance sheet.

i. Leases classified as operating leases under IAS 17

Previously, the Group classified leases as operating leases under IAS 17. For the comparative, leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis .

On transition to IFRS 16, for these leases, lease liabilities were measured at the present value of the remaining lease payments, and discounted at the respective incremental borrowing rates as at 1 January 2019.

Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.

The Group has tested its right-of-use assets for impairment on the date of transition and has concluded that there is no indication that the right-of-use assets are impaired. Subsequent to transition the right-of-use asset associated with the Fairoaks lease was impaired, see note 23.

The Group used a number of practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17. In particular, the Group:

· did not recognise right-of-use assets and liabilities for leases for which the lease term ends within 12 months of the date of initial application;

· did not recognise right-of-use assets and liabilities for leases of low value assets (e.g. IT equipment);

· excluded initial direct costs from the measurement of the right-of-use asset at the date of initial application; and

· used hindsight when determining the lease term.

ii. Leases classified as finance leases under IAS 17

The 2018 balance sheet included finance leases with a carrying value of $3m which has been reclassified to borrowings as the Group has deemed the nature of these financing arrangements to be synonymous with loan financing. See note 21.

At 31 December 2018 the value of leases classified as finance leases under IAS 17 is nil.

The Group depreciates right-of-use assets over the life of the lease.

C. As a lessor

The Group leases out property included within its right-of-use assets. The Group has classified these leases as operating leases.

The Group is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor, except for a sub-lease.

The Group sub-leases some of its properties. Under IAS 17, the head lease and sub-lease contracts were classified as operating leases. On transition to IFRS 16, the right-of-use assets recognised from the head leases are presented in leasehold property and depreciated over the life of the lease. The Group assessed the classification of the sub-lease contracts with reference to the right-of-use asset rather than the underlying asset, and concluded that they are operating leases under IFRS 16.

D. Impact on transition

The impact on transition is set out in note 23.

Standards and Interpretations in issue but not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019 reporting periods and have not been early adopted by the group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

Use of Alternative performance measures (APMs)

The performance of the Group is assessed and discussed on an 'adjusted' basis, using a variety of APMs, including Adjusted Earnings before interest and tax (EBIT), Organic Revenue Growth and Net Debt. The term 'adjusted' refers to the relevant measure being reported for continuing operations excluding 'adjusting items'.

The directors believe that adjusted profit and earnings per share measures provide additional and more consistent measures of underlying performance to shareholders by removing certain trading and non-trading items that are either not closely related to the Group's operating cash flows or non-recurring in nature. These and other APMs are used by the directors for internal performance analysis and incentive compensation arrangements for employees. The term 'adjusted' is not defined under IFRS and may therefore not be comparable with similarly titled measures reported by other companies. They are not intended to be a substitute for, or superior to, GAAP measures. Where applicable, divisional measures are calculated in accordance with Group measures.

APMs have been defined and reconciled to the nearest IFRS measure in note 6 and below, along with the rationale behind using the measures.

Adjusting items

The Group's Income Statement and segmental analysis separately identify trading results before Adjusting items. The directors believe that presentation of the Group's results in this way is relevant to an understanding of the Group's financial performance, as adjusting items are identified by virtue of their size, nature or incidence. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and assists in providing a meaningful analysis of the trading results of the Group. In determining whether an event or transaction is treated as an Adjusting item, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence.

The income statement items that are excluded from the Statutory results are referred to as Adjusting items. Adjusting items include exceptional items, amortisation of acquired intangibles, share-based payment charges and tax related to adjusting items. These items are defined and explained in more detail as follows:

Exceptional items

Exceptional items are recorded in accordance with the policy set out below:

· Transaction costs - arising on acquisitions, disposals, and debt refinancing.

· Integration and business reorganisation - legal and professional fees and non-recurring operating costs arising from significant acquisition integration or business reorganisation activities. Non-recurring operating costs means those costs that are related to a specific integration or reorganisation event that will not be repeated because they are unique to the event and which are not expected to follow a consistent level of expense from one accounting period to the next.

· Litigation - legal costs (which may be incurred in more than one accounting period) are treated as exceptional if they relate to specific commercial legal events that are not in the normal course of trading activity in respect of one-off or related series of cases and are not expected to follow a consistent level of expense from one accounting period to the next.

· Impairment losses - arising from significant non-recurring impairment reviews.

· Other items - other significant non-recurring items.

Amortisation of acquired intangible assets

Exclusion of amortisation of acquired intangibles accounted for under IFRS 3 from the Group's results assists with the comparability of the Group's profitability with peer companies. In addition, charges for amortisation of acquired intangibles arise from the purchase consideration of a number of separate acquisitions. These acquisitions are portfolio investment decisions that took place at different times over several years, and so the associated amortisation does not reflect current operational performance.

Share-based payments

The Group treat share-based payments as an adjusted item because share-based payments are a significant non-cash charge driven by a valuation model that references Gama's share price and so is subject to volatility rather than referencing operational activity.

Tax related to adjusted items

The elements of the overall Group tax charge relating to the above Adjusting items are also treated as Adjusting. These elements of the tax charge are calculated with reference to the specific tax treatment of each individual Adjusting item, taking into account its tax deductibility, the tax jurisdiction concerned, and any previously recognised tax assets or liabilities

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Operational Review and Chief Financial Officer's report.

The emergence of Covid-19 during 2020 has increased uncertainty surrounding the future trading environment for the Group, and performance in FY20 to date has been adversely impacted compared to the Directors original expectations of performance. To support their assessment of Going Concern the directors have performed a detailed analysis of cash flow projections for the Group as a whole covering the period through to 31 December 2021, taking account of the $50.0m committed revolving credit facility (of which c$29m is currently undrawn) and a $20.0m term loan which was agreed and drawn in full since the year end. These facilities have no substantive covenants and fall due for repayment after 31 December 2021. The key assumption in these projections relates to revenue performance and the directors have included what they consider to be a cautious recovery in revenue performance from the second half of FY20. Downside sensitivities have also been assessed, which reflect no further recovery in revenues and a continuation of the trading performance in Q2 FY20, which was the period most impacted by Covid-19. In both Management's base case forecasts and downside scenarios the group maintains significant headroom against its cash and available facilities.

Accordingly, the directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

Business combinations

Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the total of the acquisition date fair values of the assets transferred by the Group, the liabilities incurred by the Group to former owners and the equity issued by the Group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the minority's share of changes in equity since the date of the combination. Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. A change in the ownership interest of a subsidiary, without a loss of control is accounted for as an equity transaction, being a disposal or acquisition of non-controlling interest.

Step-acquisition

For acquisitions achieved in stages the Group first assesses the fair value of the associate interest held immediately prior to the Group obtaining control and the associate becoming a subsidiary. The difference between the fair value measured and the carrying value of the associate interest is recognised as a step-acquisition gain or loss, which the Group excludes from its adjusted performance measures. Once the associate interest has been revalued to fair value, the transaction is accounted for using the acquisition method applicable to normal business combination transactions.

Goodwill

Goodwill arising on consolidation represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and acquisition date fair value of any previous equity interest in the acquiree over the fair value of the net identifiable assets acquired. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.

For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit
or loss on disposal.

Intangible assets

Internally generated intangible assets are recognised only if they satisfy the IAS 38 criteria in that a separately identifiable asset is created from which future economic benefits are expected to flow and the cost can be measured reliably. The life of each asset is assessed individually. Where the life is considered to be indefinite no amortisation is charged.

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Included in intangible assets acquired are part 145 approvals, licences and brand, customer relations, and computer software.

A summary of the policies applied to the Group's acquired intangible assets is as follows:

· Part 145 approvals: 20% per annum, straight line method

· Licences: 10% per annum, straight line method

· Brand: 10% per annum, straight line method

· Customer relations: 10% per annum, straight line method

· Software: 20%-33% per annum, straight line method

Property, plant and equipment

Items of property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

Depreciation is recognised so as to write-off the cost of assets less their residual values over their useful lives, using the straight-line method, on the following bases:

· Leasehold improvements: Life of lease

· Right-of-use assets: Life of lease

· Aircraft hull and refurbishments: Remaining life of the aircraft, various rates between 5% and 20% per annum

· Furniture, fixtures and equipment: 20% per annum

· Motor vehicles: 20% per annum.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement.

Assets held for sale

The Group classifies assets as held for sale if their carrying value will be recovered principally through sale rather than through continuing use. Such assets are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the sale, excluding finance costs and income tax expense.

The criteria for assets held for sale is regarded as only met when the sale is highly probable, and the asset is available for immediate sale in its present condition.

Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale.

Investments in associate and joint venture

An associate is an entity over which the Group is in a position to exercise significant influence, but not control or joint
control, through participation in the financial and operating policy decisions of the investee.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.

The Group's investments in its associates and joint venture are accounted for using the equity method of accounting. The investment is carried in the balance sheet at cost as adjusted by post-acquisition changes in the Group's share of the net assets of the investment, less any impairment in the value of the investment. Losses in excess of the Group's interest in the investment (which includes any long-term interests that, in substance, form part of the Group's net investment) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investment.

Where a Group company transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group's interest in the relevant associate. Losses may provide evidence of an impairment of the asset transferred in which case appropriate provision is made for impairment. The Group's share of the changes in the carrying value of the investments in associates is recognised in the income statement.

Inventories

Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows:

· Raw materials and consumables: purchase cost on a first in, first out basis

· Work in progress: cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs

· Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Inventories include Rotable stock. Rotable stock are inventory items that can be repeatedly and economically restored to their fully serviced condition, in which an already-repaired equipment is exchanged for defective equipment, which in turn is repaired and kept for future exchange. These items have extensive life expectancy through repetitive overhaul process.

The rotable parts could either be recognised as property, plant and equipment ("PPE") or inventory. Following specialist advice and consistent with industry practice, the Group policy recognises Rotables as inventory. In addition, the cost of any refurbishment of Rotables is recognised in inventory.

The Group policy on recognising inventory at the lower of cost and net realisable value does this by providing for rotables on a sliding scale over the preceding four years. As a result, inventory older than four years is written off in full. A nuance to the provisioning policy is however made for the "non-core" which represents the exchange value of the part in the market. On the basis that there is an exchange value and market, the provision is only made for the "core" component.

Cash and cash equivalents

The Group's cash and cash equivalents in the statements of financial position comprise cash at bank and on hand and short-term deposits with a maturity of three months or less from inception, which are subject to an insignificant risk of changes in value.

For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Group's cash management.

Financial instruments

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Financial assets

Trade receivables and other receivables are measured at amortised cost less an expected credit loss allowance, determined as set out below in "impairment of financial assets". Any write-down of these assets is expensed to the income statement.

Impairment of financial assets

It is not necessary for a credit event to have occurred before credit losses are recognised. Instead, the Group accounts for expected credit losses and changes in those expected credit losses. The amount of expected credit losses are updated at each reporting date.

The impairment model applies to the Group's financial assets that are debt instruments measured at amortised costs as well as the Group's lease receivables, contract assets and issued financial guarantee contracts. The Group has applied the simplified approach to recognise lifetime expected credit losses for its trade receivables, and contracts assets as required or permitted by IFRS 9.

Expected credit losses are calculated with reference to average loss rates actually incurred in the three most recent reporting periods to which a country risk premium is added, based on the location of each business. The combined loss rate represents the maximum expected credit default risk, which is expressed as a percentage. The Group average combined loss rate is approximately 1%.

This percentage rate is then applied to current receivable balances using a probability risk spread as follows:

· 80% of debt not yet due (i.e. the Group's average combined loss rate of 1% is discounted by 20%, meaning a 0.8% loss allowance would be made to debt not yet due);

· 85% of debt that is <30 days overdue;

· 90% of debt that is 30-60 days overdue;

· 95% of debt that is 60-90 days overdue; and

· 100% of debt that is >90 days overdue.

Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance
of the contractual arrangement.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

Other financial liabilities

Other financial liabilities, including borrowings and payables, are initially measured at fair value and subsequently at amortised cost, net of transaction costs.

Derecognition of financial assets and financial liabilities

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

Provisions and contingent liabilities

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

A contingent liability is disclosed where the existence of the obligation will only be confirmed by future events, or where the amount of the obligation cannot be measured reliably.

Segmental reporting

An operating segment is a distinguishable component of the Group that is engaged in business activities from which it may earn revenues and incur expenses, and whose operating results are reviewed regularly by the Chief Operating Decision Maker (the Group Chief Executive) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Reportable segments are operating segments that either meet the thresholds and conditions set out in IFRS 8 or are considered by the Board to be appropriately designated as reportable segments under IFRS 8.

Supplier volume rebates

The Group has supplier contracts for the provision of certain services, which attract volume rebates, the credit for which is recognised centrally. The anticipated rebate receivable is accrued throughout the year based on the agreement terms.

Revenue recognition

Revenue is measured based on the performance obligations and consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers control of a product or service to a customer or when it meets the performance obligations specified or implied in the contract.

Sale of business aviation services revenue from the following major sources:

· Managed aircraft contracts and specific air services

· Maintenance of aircraft

· Design and modification projects

· Fixed base operations ('FBO')

Managed aircraft contracts and specific air services

These activities are provided by the Group's Air Division. Services provided under managed aircraft contracts include flight training, cost management, flight planning and scheduling, crew management, maintenance oversight and regulatory compliance as separate performance obligations falling into one or more of the contract components identified below.

The services are contract based with costs such as fuel, insurance, crew and maintenance being recharged to the client. Specific air services provided under this heading include a variety of specific contracts with customers where one or more elements of fully managed services are provided.

The managed aircraft contracts have three components:

· Pre-delivery services and services prior to aircraft's entry into service (if appropriate)

· Management services

· Variable fees based on flying hours and related rechargeable costs

Most specific services provided arise in components 1 and 3, whilst management services relate to overarching administrative services relating to ongoing regulatory compliance requirements, billed on a regular basis over the life of the contract. These components are distinct as the customer can benefit from the services on their own and the Group's promise to provide the service is separately identifiable from other promises in the contract. The three components are therefore deemed to be separate performance obligations and revenue is recognised based on the above performance obligations as follows:

· Revenue is recognised once the service has been performed (at a point in time).

· The customer simultaneously receives and consumes the benefits provided by the Group, therefore revenue is recognised over time.

· Variable flying hours revenue is recognised monthly based upon actual flight information and other relevant information held on the internal billing system (at a point in time). Rechargeable costs are recognised gross, as revenue and related cost of sales and are recognised at a point in time (for example, monthly) based upon either actual rechargeable costs or estimated costs to be recharged.

The Group has considered whether it is acting as agent or principal in the context of its managed aircraft contracts and has concluded that it is the principal in relation to the entirety of these contracts. Rechargeable costs are recognised gross because the Group controls the services before they are transferred to customers and because they are linked to wider management services. For practical purposes management services and rechargeable costs (and other variable fees based on flying hours) are itemised separately in billing to customers, but for the purposes of revenue recognition there is an allocation of management fee revenue to rechargeable costs to reflect the standalone selling price of that revenue stream.

Maintenance of aircraft

These activities are provided by the Group's Ground Division. The Group provides both base and line maintenance services. Base maintenance relates to the planned maintenance that is required by the aircraft manufacturer or component supplier. This work is complex, highly regulated and location specific. Line maintenance covers irregular maintenance activities, component failure or simple wear and tear. Both types of services are provided on a fee or contract basis.

Maintenance revenue is recognised over time in line with the performance of the related maintenance work as the Group's performance of maintenance services do not create assets with an alternative use and the Group has an enforceable right to payment for performance completed to date. In most cases work is carried out and billed to the customer in the same accounting period. However, for work ongoing at the end of an accounting period an assessment of the extent to which contracted work is completed is made and a corresponding amount of revenue is accrued.

This assessment is made using the input method of labour hours expended and costs incurred.

Design and modification projects

The Group undertakes certain equipment design and modification activities for some customers. These activities are provided by both Air and Ground Divisions of the Group. Revenue is recognised over time in line with the performance of the related design and modification work for design projects because the Group's performance of its contractual obligations creates or enhances an asset that the customer controls as the asset is created or enhanced. Work that is outstanding under design and modification contracts at the end of an accounting period is accrued and a contract asset (accrued income) is recognised on the balance sheet, based upon the input method of measuring progress (cost and labour hours expended to date).

Branding fees from associates

The Group receives a branding fee from its US Air Associate in addition to its equity accounted share of profit from associate. The branding fee is payable quarterly in arrears and the Group recognises revenue over time as the customer simultaneously receives and consumes the benefits provided by the Group.

Fixed Base Operation

The Group also provides fixed base operation activities in Jersey, Scotland and Middle East through the Ground Division. This includes hangar parking and apron parking space to customers. Revenue is recognized as the service is provided over time.

Foreign currencies

The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in US Dollars, which is the presentation currency for the consolidated financial statements. These financial statements are presented in US Dollars because that is the currency of the primary economic environment in which the Group operates. The Company's functional currency is determined to be Pounds Sterling because this is the currency of the primary economic environment in which the Company operates.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognised in other comprehensive income and accumulated in equity. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate for each year end.

Retirement benefit costs

Payments to defined contribution retirement benefit schemes are charged as an expense when employees have rendered the service entitling them to the contributions. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group's obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates and laws that have been enacted or substantively enacted by the balance sheet date that are expected to apply in the period when the liability is settled, or the asset is realised.

Deferred tax is charged or credited in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

3. Critical accounting judgments and key sources of estimation uncertainty

In the application of the Group's accounting policies, which are described in note 2, the Directors are required to make judgments (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgments in applying the Group's accounting policies

The following are the critical judgments, apart from those involving estimations (which are dealt with separately below), that management have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in financial statements.

Classification of items of cost or income as "Exceptional" (exclusion of items from Adjusted EBIT)

Management consider exceptional costs to be those that do not contribute to the underlying performance of the Group as set out in the policy. This requires judgment as the management and Group's view of what qualifies as an exceptional item may differ from similar judgments made by others. Exceptional items are treated as adjusting items to enable more relevant and reliable financial information to be presented. The exceptional items recorded in the income statement relate to transaction costs; business integration and re-organisation costs; legal costs arising primarily from historic Hangar 8 activity; and other non-recurring items that management judge to be exceptional.

Control over Gama International Saudi Arabia ("GISA")

Management previously judged that at 31 December 2018 the Group did not control GISA, which management believe operates on an arm's length basis. As communicated in the interim results for the six months to 30 June 2019, the results of GISA, following the correction of an accounting assessment under IFRS 10, have been consolidated. There has been no change to the legal status or ownership of that entity.

IFRS 16 leases

Management exercised judgement in the choice of transition method. The modified retrospective approach was adopted, where the right-of-use asset equals the lease liability at 1 January 2019. Accordingly, the comparative information presented for 2018 is not restated. In addition, there is judgement in the determination of the lease term.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period, that may have a significant risk of causing a materially different outcome to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Impairment review

The goodwill, intangibles, investment in associates and assets under construction require the use of estimates related to future profitability and the cash generating ability of the related businesses. The estimates used may differ from the actual outcome. Details of the impairment review performed are set out in notes 14, 15, 16 and 18.

Loss allowances on financial assets

The loss allowance is calculated based on management's best estimate of the amounts which will be recovered from trade receivables. A proportion of the trade receivables balance is with individuals and overseas Groups, for whom it is more difficult to establish a credit rating. Management are in constant communication with all debtors and assess the likelihood of recoverability on a regular basis. The estimate of the loss allowance may vary from the actual amounts recovered if an individual becomes unable to pay. An analysis of the trade receivables balance and indications of credit concentration are provided in note 20.

Valuation of inventories

Management exercise judgment in measuring inventory at the lower of cost and net realisable values. The estimate of the net realisable value represents management's best estimate and it may vary from the actual realisation, notwithstanding the regular review and monitoring.

Estimation of amounts owed and receivable in relation to long-term contracts - Europe Ground Division

Management exercise judgment in determining the costs to complete and the revenue recognised in relation to long-term contracts. Judgment is required specifically around the estimated outcome of commercial discussions at the time of contract conclusions and during renegotiation periods. Some contracts enable customer to conduct a retrospective review of costs incurred which could result in revision to the estimates made at this point in time.

4. Segment information

The Group has eleven reportable segments (Air Division - four regional businesses; Ground Division - four regional businesses; Global Services Division - also comprising two businesses combined as one reportable segment; the Associates Division - two businesses; and Central Costs), which are defined by markets rather than product type. Each segment includes businesses with similar operating and marketing characteristics. These segments are consistent with the internal reporting reviewed each month by the Group Chief Executive. Reportable segments are operating segments that either meet the thresholds and conditions set out in IFRS 8 for separate reporting or are considered by the Board to be appropriately aggregated into reportable segments under IFRS 8.

The Chief Operating Decision maker reviews the results on a pre-IFRS 16 basis. The tables below reconcile the pre-IFRS 16 results to the equivalent statutory result, with the exception of gross profit. The total difference between statutory gross profit and pre-IFRS 16 gross profit is $191k and shown in Note 23.

Air Divisional Performance

$'000s

Adjusted EBIT

	US		Europe		Middle East		Asia		Total
	2019	2018	2019	2018	2019	2018*	2019	2018*	2019	2018*
Revenue	4,050	4,921	99,145	88,804	16,778	20,966	20,650	20,674	140,623	135,365
Gross Profit	4,050	4,997	6,050	7,527	1,519	2,223	1,218	1,191	12,837	15,938
GP %	100%	102%	6%	8%	9%	11%	6%	6%	9%	12%
EBIT	3,898	4,892	622	186	(571)	(1,361)	123	328	4,072	4,045
EBIT %	96%	99%	1%	0%	(3%)	(6%)	1%	2%	3%	3%

Adjustments to EBIT

		US		Europe		Middle East		Asia		Total
		2019	2018	2019	2018	2019	2018	2019	2018*	2019	2018*
Exceptional items		(250)	(3,600)	(2,072)	(846)	134	(27)	(16)	(57)	(2,204)	(4,530)
Amortisation		-	-	-	(334)	-	-	-	-	-	(334)
Impairment charges		-	-	-	(24,915)	-	-	-	(3,486)	-	(28,401)
Profit on step acquisition		-	-	-	-	-	-	-	986	-	986
Application of IFRS 16		-	-	396	-		-	14	-	410	-
Total adjustments		(250)	(3,600)	(1,676)	(26,095)	134	(27)	(2)	(2,557)	(1,794)	(32,279)
Discontinued operations**		-	-	-	(807)	-	-	-	-	-	(807)

* Restatements are detailed in note 2 of the notes to the financial statements  

** The effects of discontinued operations are shown on a single line on the face of the consolidated income statement. This effect is included already within the statutory result shown below and is split out in the table above to aid understanding.

Statutory EBIT

	US		Europe		Middle East		Asia		Total
	2019	2018	2019	2018	2019	2018	2019	2018*	2019	2018*
EBIT	3,648	1,292	(1,054)	(25,909)	(437)	(1,388)	121	(2,229)	2,278	(28,234)
EBIT %	90%	26%	(1%)	(29%)	(3%)	(7%)	1%	(11%)	2%	(21%)

Ground Divisional Performance

$'000s

Adjusted EBIT

	US		Europe		Middle East		Asia		Total
	2019	2018	2019	2018*	2019	2018	2019	2018*	2019	2018*
Revenue	48,943	37,517	48,176	52,301	4,372	4,636	1,476	1,091	102,967	95,545
Gross Profit	6,360	8,101	15,605	15,720	1,453	1,374	632	673	24,050	25,868
GP %	13%	22%	32%	30%	33%	30%	43%	62%	23%	27%
EBIT	(268)	1,887	6,247	6,146	(466)	(342)	(551)	(118)	4,962	7,573
EBIT %	(1%)	5%	13%	12%	(11%)	(7%)	(37%)	(11%)	5%	8%

*Restatements are detailed in note 2 of the notes to the financial statements  

Adjustments to EBIT

		US		Europe		Middle East		Asia		Total
		2019	2018	2019	2018	2019	2018	2019	2018	2019	2018
Exceptional items		(657)	(6)	(4,891)	(2,630)	-	2	(26)	-	(5,574)	(2,634)
Amortisation		-	(633)	-	(113)	-	(273)	-	(350)	-	(1,369)
Impairment charges		(540)	-	-	-	-	-	-	-	(540)	-
Application of IFRS 16		538	-	1,169	-	193	-	-	-	1,900	-
Total adjustments		(659)	(639)	(3,722)	(2,743)	193	(271)	(26)	(350)	(4,214)	(4,003)

Statutory EBIT

	US		Europe		Middle East		Asia		Total
	2019	2018	2019	2018	2019	2018	2019	2018*	2019	2018*
EBIT	(927)	1,248	2,525	3,403	(273)	(613)	(577)	(468)	748	3,570
EBIT %	(2%)	3%	5%	7%	(6%)	(13%)	(39%)	(43%)	1%	4%

Global Services Divisional Performance

$'000s

Adjusted EBIT

	Total
	2019	2018
Revenue	3,223	3,949
Gross Profit	2,395	2,662
GP %	74%	67%
EBIT	689	1,253
EBIT %	21%	32%

Adjustments to EBIT

	Total
	2019	2018
Exceptional items	(45)	(121)
Amortisation	(316)	-
Application of IFRS 16	(3)	-
Total adjustments	(364)	(121)

Statutory EBIT

	Total
	2019	2018
EBIT	325	1,132
EBIT %	10%	29%

Reconciliation of divisional to overall Group performance:

			2019				2018
		Revenue	Statutory EBIT Post-IFRS 16	Adjusted EBIT Post-IFRS 16	Adjusted EBIT Pre-IFRS 16	Revenue	Statutory EBIT Pre-IFRS 16 Restated*	Adjusted EBIT Pre-IFRS 16 Restated*
US Air		4,050	3,648	3,898	3,898	4,921	1,292	4,892
Europe Air		99,145	(1,054)	1,018	622	88,804	(25,909)	186
Middle East Air		16,778	(437)	(571)	(571)	20,966	(1,388)	(1,361)
Asia Air		20,650	121	137	123	20,674	(2,229)	328
Air Division		140,623	2,278	4,482	4,072	135,365	(28,234)	4,045
US Ground		48,943	(927)	271	(268)	37,517	1,248	1,887
Europe Ground		48,176	2,525	7,416	6,247	52,301	3,403	6,146
Middle East Ground		4,372	(273)	(274)	(466)	4,636	(613)	(342)
Asia Ground		1,476	(577)	(551)	(551)	1,091	(468)	(118)
Ground Division		102,967	748	6,862	4,962	95,545	3,570	7,573
Global Services		3,223	325	686	689	3,949	1,132	1,253
Associates (note 18)		-	918	918	918	-	566	566
Central Costs		-	(11,271)	(7,383)	(7,377)	-	(11,022)	(5,024)
Adjusted result		246,813	(7,002)	5,565	3,264	234,859	(33,988)	8,413
Adjusting items to Statutory result:
Adjusting items (note 6)		-	-	(12,567)	(12,567)	-	-	(42,401)
Application of IFRS 16 (note 23)		-	-	-	2,301	-	-	-
Statutory result	246,813		(7,002)	(7,002)	(7,002)	234,859	(33,988)	(33,988)

*Restatements are detailed in note 2 of the notes to the financial statements

An analysis of the Group's total assets and liabilities by segment is as follows:

	2019		2018 Restated*
	Assets	Liabilities	Assets	Liabilities
US Air	4,172	(125)	8,051	(1,322)
US Ground	27,423	(15,342)	13,170	(3,163)
Europe Air	59,812	(36,786)	25,461	(25,681)
Europe Ground	56,169	(38,977)	31,730	(15,543)
Middle East Air	5,518	(5,650)	4,734	(4,828)
Middle East Ground	12,922	(9,658)	3,068	(1,649)
Asia Air	10,951	(8,184)	10,903	(8,785)
Asia Ground	1,080	(94)	-	-
Global Services	10,349	(924)	8,307	(4,720)
Associates	17,710	-	18,287	-
Central Costs	27,024	(51,656)	23,335	(2,279)
Total	233,130	(167,396)	147,046	(67,970)

*Restatements are detailed in note 2 of the notes to the financial statements

An analysis of the Group's revenue is as follows:

	Year ended 2019 $'000	Year ended 2018 $'000
Continuing operations
Sale of business aviation services	242,763	231,109
Branding fees	4,050	3,750
Totals	246,813	234,859

No single customer represents more than 10% of the Group's total revenue (2018: none).

The Group has not separately disclosed revenue by country because this is not tracked internally and because management believe that the Group's operating segments align very closely to country reporting with European divisions representing the UK and Channel Islands; the US divisions representing the United States; the Asia divisions representing Hong-Kong and the Middle East divisions mainly representing the U.A.E.

Geographic information

	2019 Post-IFRS 16 $'000	2019 Pre-IFRS 16 $'000	2018 Pre-IFRS 16 $'000
Non-current assets
US	13,540	3,898	3,869
Europe	61,687	26,603	15,893
Asia	482	248	301
Middle East	11,825	4,486	2,089
Group	105	90	96
	87,639	35,324	22,248

Non-current assets for this purpose consist of property, plant and equipment.

5. EBIT for the year

EBIT for the year has been arrived at after charging/(crediting):

	Year ended 2019 $'000	Year ended  2018 Restated* $'000
Net foreign exchange loss/ (gain) on trading monetary items	188	(380)
Loss on disposal of property, plant and equipment	82	-
Depreciation of property, plant and equipment (see note 16)	3,019	2,544
Depreciation of right-of-use assets in administrative expenses (see note 23)	754	-
Depreciation of right-of-use assets in cost of sales (see note 23)	15,152	-
Amortisation of intangibles (see note 15)	1,425	2,484
Impairment of goodwill and acquired intangibles (see note 14 and 15)	540	28,401
Impairment of right-of-use assets (see note 23)	2,341	-
Cost of inventories recognised as an expense including changes in inventory obsolescence (see note 19)	30,706	20,380
Change in provision for inventory obsolescence	2,364	(1,107)
Staff costs (see note 8)	70,982	62,350
Impairment losses recognised on trade receivables (see note 20)	2,387	965
Reversal of impairment losses recognised on trade receivables (see note 20)	-	(131)
Auditors' remuneration:
Audit of the company's annual accounts	278	130
Audit of the accounts of subsidiaries	610	527
Tax advisory services	-	96
Other deal support services	77	15

*Restatements are detailed in note 2 of the notes to the financial statements

6. Adjusted performance measures

The Adjusted result has been arrived at after the following Adjusting items:

	Year ended 2019 $'000	Year ended  2018 Restated* $'000
Exceptional items:
- Transaction costs	88	3,581
- Integration and business re-organisation costs	5,246	2,364
- Legal costs	2,212	2,318
- Other items	2,636	3,600
Total exceptional items	10,182	11,863
Share-based payments expense (note 31)	861	639
Amortisation of acquired intangible assets (note 15)	984	2,484
Impairment of goodwill and acquired intangibles, as reported	540	27,708
Impairment of goodwill and acquired intangibles, restatement (note 13)	-	693
Adjusting items in Operating profit	12,567	43,387
Profit on step acquisition	-	(986)
Adjusting items in EBIT	12,567	42,401
Tax related to Adjusting items	(577)	(890)
Adjusting items in profit	11,990	41,511

*Restatements are detailed in note 2 of the notes to the financial statements  

Transaction costs

Transaction costs in the prior year relate to the acquisitions of both the remaining 50% of GAHH and the investment in CASL.

Integration and business re-organisation costs

Integration and business re-organisation costs include:

· Fairoaks direct closure costs of $1,012k (note 30)

· Fairoaks impairment of the right-of-use asset associated with the lease of $2,341k (note 23); and

· Accounting support, compliance and control reviews and other group re-organisation costs $960k

· $933k of non-recurring expenditure related to property and facility re-organisation at Bournemouth, Farnborough and Florida

Legal costs

Legal cost in the current and prior year principally relate to professional fees in relation to ongoing litigation in respect of legacy cases going back many years.

Other items

In the current year other items comprise a $2,010k impairment allowance on trade receivables under legal proceedings and a $626k impairment of inventories, both of which relate to legacy matters. In the prior year, other items represented a $3,600k contribution to associate.

Impairment of goodwill and acquired intangibles

The impairment charge of $540k in the current year (2018: $28,401k) resulted from the Group's annual IAS 36 impairment review. Intangible assets recognised on acquisition of the Florida Paint-Shop in the year of $540k, have been allocated to the US Ground CGU, and subsequently impaired. In the prior year the $28,401k impairment comprises $21,073k charged against goodwill and the remaining $7,328k against acquired intangibles. As a result of the impairment charge, goodwill of $18,317k allocated to the Europe Air cash generating unit ("CGU") grouping was reduced to nil. The impairment charge resulted primarily from an updated outlook for 2019 for the Europe Air business, which in turn was based on the full year results for 2018 for this operating segment, which were below expectations. In addition, goodwill of $2,756k in Gama Aviation Hutchison Holdings Ltd (GAHH) in the Asia Air CGU was reduced to nil. The impairment of acquired customer relationship intangibles in the prior year includes an impairment of $2,793k on Gama Aviation Hutchison Holdings Ltd (GAHH) in the Asia Air CGU and $4,535k in Europe Air CGU.

Organic revenue growth

Organic revenue growth is a measure which seeks to reflect the performance of the Group that will contribute to long-term sustainable growth. As such, organic revenue growth excludes the impact of acquisitions or disposals, and foreign exchange movements. We focus on the trends in organic revenue growth.

A reconciliation from the growth in reported revenue, the most directly comparable IFRS measures, to the organic revenue growth is set out below.

	2019				2018
	Revenue	Rebase for acquisitions	Organic revenue	% Organic growth	Revenue, as restated	Rebase for FX	Rebased comparative revenue
US Air	4,050	-	4,050	(17.7%)	4,921	-	4,921
Europe Air	99,145	-	99,145	17.3%	88,804	(4,270)	84,534
Middle East Air	16,778	-	16,778	(20.0%)	20,966	-	20,966
Asia Air*	20,650	-	20,650	(0.1%)	20,674	-	20,674
Air	140,623	-	140,623	7.3%	135,365	(4,270)	131,095
US Ground	48,943	(2,307)	46,636	24.3%	37,517	-	37,517
Europe Ground	48,176	-	48,176	(3.2%)	52,301	(2,515)	49,786
Middle East Ground	4,372	-	4,372	(5.7%)	4,636	-	4,636
Asia Ground	1,476	-	1,476	35.3%	1,091	-	1,091
Ground	102,967	(2,307)	100,660	8.2%	95,545	(2,515)	93,030
Global Services	3,223	-	3,223	(14.3%)	3,949	(190)	3,759
Total	246,813	(2,307)	244,506	7.3%	234,859	(6,975)	227,884

*On 2 March 2018, the Group increased its shareholding in Gama Aviation Hutchison Holdings Ltd and consolidated this entity. A rebasement has not been made for the two months prior to acquisition.

Constant currency calculations

Constant currency calculations are used for year on year comparability and shown below.

	2019	% Growth	2018 As restated	2018 Rebase for FX	2018 Rebased
Revenue	246,813	8.3%	234,859	(6,975)	227,884
Gross Profit	39,282	(9.1%)	44,468	(1,246)	43,222
Gross Profit %	15.9%	-	18.9%	-	19.0%
Adjusted EBIT	3,264	(60.6%)	8,413	(123)	8,290

7. Discontinued operations

Discontinued operations primarily relate to the losses generated by the formerly owned aircraft within the Group that were held for sale as part of the Group strategy to exit the business model of owned aircraft that are deployed solely for the purposes of ad-hoc charter. At the beginning of 2018 the Group announced the closure of its Swiss operation, Gama Aviation SA and treated this as a discontinued operation.

The results of these discontinued operations are presented below:

Discontinued operations	Year ended 2019 $'000	Year ended 2018 $'000
Revenue	-	538
Expenses	-	(1,345)
Operating loss	-	(807)
Net finance income	-	40
Loss before and after tax from discontinued operations	-	(767)
Earnings per share
Basic - cents	-	(1.27c)
Diluted - cents	-	(1.27c)

The weighted average number of ordinary shares is included in Note 13.

The net cash flows incurred by discontinued operations are as follows:

Operating activities	-	1,516
Investing activities	-	(1,500)
Net cash outflow	-	16

Net cash from investing activities in both 2018 represents the proceeds of sale from assets designated as held for sale in the prior year.

8. Staff costs

The average monthly number of employees (including executive directors) was:

	Year ended 2019 Number	Year ended 2018 Restated* Number
Operations and administration	428	362
Pilots and cabin crew	115	111
Aircraft engineering	286	226
	829	699

*Restatements are detailed in Note 2.

Their aggregate remuneration comprised:

	Year ended 2019 $'000	Year  ended 2018 Restated* $'000
Wages and salaries	60,878	53,022
Social security costs	7,796	7,555
Share-based payments (Note 31)	861	639
Other pension costs (Note 32)	1,447	1,134
	70,982	62,350

Details of directors' remuneration are given in the Remuneration Report. The share option costs relating to these directors amounted to $208k (2018: $118k).

9. Finance income

	Year ended 2019 $'000	Year ended 2018 $'000
Foreign currency translation on intercompany balances	-	581
Foreign currency translation on borrowings	693	201
Interest income on bank deposits	2	5
Total finance income	695	787

*Restatements are detailed in Note 2 of the notes to the financial statements  

10. Finance expense

	Year ended 2019 $'000	Year ended 2018 Restated* $'000
Foreign currency translation on intercompany balances	136	-
Interest on bank overdrafts and loans before capitalised interest	965	954
Capitalised interest (see note 16)	(122)	-
Discounting on onerous provision (see note 30)	35	-
Interest on lease liabilities (note 23)	3,061	-
Write off existing loan arrangement fees (note 21)	398	-
Amortisation of loan arrangement fees	172	-
Other similar charges payable	12	-
Total finance costs	4,657	954

*Restated for presentation of $170k of interest on obligations under finance leases which follows the restatement of finance leases described in Note 2 of the notes to the financial statements

Amortisation of loan arrangement fees includes $161k in relation to previous facility and $11k in relation to the current facility.

11. Taxation

	Year ended 2019 $'000				Year ended 2018 Restated* $'000
	Statutory result	Adjusting items	Adjusted result	Statutory result		Adjusting items	Adjusted result
Corporation tax:
Current year charge	729	-	729	1,411		-	1,411
Deferred tax charge (note 22)	(234)	577	343	(862)		890	28
Current year charge	(30)	577	547	110		890	1,000
Adjustment in respect of prior years	(204)	-	(204)	(972)		-	(972)
Total tax charge for the year	495	577	1,072	549		890	1,439

*Restatements are detailed in Note 2 of the notes to the financial statements which relate to adjustment in respect of prior years for 2018 in the table above.

Refer to Note 34 for future changes in the tax rate and the impact on deferred tax.

No deferred tax asset has been recognised on share-based payment transactions because the options are currently out of the money. As a result, no tax relating to share based payment is recognised directly in equity. Tax on restatement of the loss before tax in the year ended 2018 of $972k has been recognised in the income statement.

There is no material tax on the restatement of opening retained earnings of $114k, which would be reflected directly in equity.

12. Earnings per share ("EPS")

The calculation of earnings per share is based on the earnings attributable to the ordinary shareholders divided by the weighted average number of shares in issue during the period.

	Year ended 2019 $'000	Year ended 2018 Restated* $'000
Numerator
Statutory Earnings
Continuing loss attributable to ordinary equity holders of the parent	(11,554)	(34,718)
Discontinued loss attributable to ordinary equity holders of the parent	-	(767)
Total loss attributable to ordinary equity holders of the parent	(11,554)	(35,485)
Adjusted earnings:
Continuing profit attributable to ordinary equity holders of the parent	436	6,811
Discontinued profit attributable to ordinary equity holders of the parent	-	(767)
Total profit attributable to ordinary equity holders of the parent	436	6,044
Denominator
Weighted average number of shares used in basic EPS	63,636,279	60,348,056
Effect of dilutive share options	-	434,837
Weighted average number of shares used in diluted EPS	63,636,279	60,782,893
Earnings per share (cents)
Statutory total earnings per share
Basic	(18.2c)	(58.8c)
Diluted	(18.2c)	(58.8c)
Statutory continuing earnings per share
Basic	(18.2c)	(57.5c)
Diluted	(18.2c)	(57.5c)
Adjusted continuing earnings per share
Basic	0.7c	11.3c
Diluted	0.7c	11.2c

*Restatements are detailed in Note 2 of the notes to the financial statements

The average share price for the year ended 31 December 2019 was 77 cents, which is lower than the exercise price of outstanding options and therefore there is no dilutive effect.

The effect of dilutive share options on Diluted EPS does not reduce the loss per share, but would reduce the earnings per share.

The weighted average number of shares used in basic EPS has not been reduced by any shares held by the employee benefit trust, refer to Note 25 for further details on the employee benefit trust.

13. Acquisitions

On 10 January 2019, the Group acquired the trade and assets of a paint and interior completion business previously operated by Lotus Aviation Group at Fort Lauderdale Executive Airport ("Paint-Shop"). The Group determined the acquisition to be a business as defined by IFRS 3 and the transaction has been accounted for as a business combination.

The following table summarises the consideration paid for the Paint-Shop, the fair value of assets acquired, and the liabilities assumed at the acquisition date.

Acquisition accounting at 10 January 2019

	$'000
Cash consideration	1,000
Deferred consideration	365
Finalisation of deferred consideration*	(55)
Total consideration transferred	1,310

*The purchase price included a deferred consideration of $365k which was subsequently revised to $310k due to early settlement. The reduction of $55k has been allocated to goodwill.

Recognised amounts of identifiable assets acquired and liabilities assumed.

	$'000
Property, plant and equipment	120
Customer relationships (included within intangibles)	195
Brand (included within intangibles)	345
Deferred tax liability	(139)
Inventory	2
Goodwill	787
Total consideration	1,310

Subsequent to the finalisation of the acquisition accounting of Paint-Shop, there was an indication that the Customer relationship and Brand intangible asset was impaired, resulting in an impairment charge of $540k. The carrying amount of these intangibles at 31 December 2019 is $nil.

From the date of acquisition, Paint-Shop contributed $2,307k revenue, losses of $532k on Gross Profit and $960k Adjusted EBIT respectively. It is impracticable and immaterial to quantify the ten days prior to acquisition and therefore disclose the impact if the Paint-Shop acquisition had taken place at the beginning of the year.

On 2 March 2018, the Group acquired Hutchison Whampoa (China) Limited's 50% stake in Gama Aviation Hutchison Holdings Ltd for $3,050k. The amounts of identifiable assets acquired and liabilities assumed on acquisition has been restated as detailed in Note 2 and shown below.

	As reported $'000	Restatement* $'000	As restated* $'000
Property, plant and equipment	249	-	249
Customer relationships (included within intangibles)	4,202	-	4,202
Deferred tax liability	-	(693)	(693)
Trade and other receivables	5,069	-	5,069
Cash	460	-	460
Trade and other payables	(7,842)	-	(7,842)
Deferred revenue	(165)	-	(165)
Profit recognised on acquisition in respect of pre-existing shareholding	(986)		(986)
Goodwill	2,063	693	2,756
Total consideration	3,050	-	3,050

* Restatements are detailed in Note 2 of the notes to the financial statements

14. Goodwill

	$'000
Cost
At 1 January 2018	44,413
Recognised on acquisition	2,756
Exchange differences	(2,285)
At 1 January 2019	44,884
Recognised on acquisition (note 13)	787
Exchange differences	849
At 31 December 2019	46,520
Accumulated impairment losses
At 1 January 2018	3,697
Impairment loss for the year, as reported	20,380
Impairment loss for the year, restatement	693
At 31 December 2018 and 2019	24,770
Carrying amount
At 31 December 2019	21,750
At 31 December 2018	20,114

* Restatements are detailed in Note 2 of the notes to the financial statements

The recoverable amount of goodwill is allocated to the following cash generating units ("CGUs"):

	2019 $'000	2018 $'000
US: Ground	787	-
Europe: Ground	20,963	20,114
	21,750	20,114

When testing for impairment, recoverable amounts for all of the Group's CGUs are measured at their value-in-use ("VIU") by discounting the future expected cash flows from the assets in the CGUs.  The CGU's that have goodwill are Europe Ground and US Ground (2018: Europe Ground only). The key assumptions and estimates used for VIU calculations are as follows:

Future expected cash flows

VIU calculations are based on estimated future pre-tax cash flows as approved by the board, and a 1.9% (2018: 1.7%) terminal growth rate thereafter.

Beyond the current year forecast period, a long-term terminal growth rate of 1.9% (2018: 1.7%) has been applied to calculate terminal value for all CGUs. This is on the basis that the Group operates in both advanced and emerging markets, and is the average Real GDP Growth Rate per the IMF World Economic Outlook published in April 2020 from 2019 to 2021. The Group has used the Real GDP Growth Rate as a proxy for long-term terminal growth rate of Gama Aviation. Long-term growth rates are capped at the weighted average GDP growth rates of the markets that the CGU Group sells into.   The Board believes this approach provides a reasonable and prudent approach to assessing future cashflows.

CGU specific operating assumptions are applicable to the forecast cash flows for the year to 31 December 2020 and relate to revenue forecasts, expected project outcomes, cash conversion and forecast operating margins in each of the operating companies. The relative value ascribed to each assumption will vary between CGUs as the forecasts are built up from the underlying operating companies within each CGU Group.

Weighted average cost of capital ("WACC")

A pre-tax discount rate is calculated by reference to the weighted average cost of capital ("WACC") of each CGU, adjusted to reflect the market and other systemic risks specific to each CGU and the territories in which they operate.

A pre-tax WACC of 10.1% has been used as a discount rate. In the prior year, pre-tax discount rates ranged from 15.6% to 16.3%, were based on short-term variables and as disclosed in the prior year, may differ from the WACC. In addition, the cost of debt has decreased from the prior year, and the level of debt, which has a lower return than equity, has increased from the prior year, refer to Note 21 for further details on the refinancing. The pre-tax WACC of 10.1% is higher than the Group's listed industry peers, driven by a significantly higher rate of return on equity partially offset by a lower rate of return on debt.

Sensitivity to changes in assumptions

The calculation of value in use is most sensitive to the discount rate, long-term growth rate and future expected cash flows used. The Group has performed sensitivity analyses across all CGUs which have goodwill and acquired intangible assets, using reasonably possible changes in the already conservative long-term growth rates and pre-tax discount rates. In addition, for estimated future pre-tax cash flows, the Group considered a scenario using the results for the 2019 financial year as a base and a 1.9% terminal growth rate thereafter. The sensitivity analysis for Europe Ground showed:

· A 1% decrease in the terminal growth rate or a 1% increase in the discount rate would not result in an impairment. However a 1% adverse movement in both variables would result in an impairment of $1,301k.

· In a scenario using a terminal growth rate of 1.9% from the results for the 2019 financial year, no reasonable change in the discount rate or terminal growth rate would result in an impairment.

Considering the sensitivity to changes in assumptions and noting that the recoverable amount of all CGU's exceed the carrying amount, no impairment has been recognised.

15. Other intangible assets

	Commence operations $'000	Part 145 approvals $'000	Licences and Brands $'000	Customer relations $'000	Computer software $'000	Total $'000
Cost
At 1 January 2018	1,488	3,589	1,383	12,170	1,049	19,679
Additions	-	-	-	-	3,171	3,171
Recognised on acquisition	-	-	-	4,202	-	4,202
Foreign exchange differences	(7)	(145)	(77)	(682)	(220)	(1,131)
At 31 December 2018	1,481	3,444	1,306	15,690	4,000	25,921
Additions	-	-	-	-	3,093	3,093
Recognised on acquisition	-	-	345	195	-	540
Disposals	-	(2)	-	-	-	(2)
Foreign exchange differences	-	-	(46)	(406)	241	(211)
At 31 December 2019	1,481	3,442	1,605	15,479	7,334	29,341
Amortisation and accumulated impairment losses
At 1 January 2018	1,215	2,589	1,268	3,026	17	8,115
Amortisation, as reported	273	633	24	1,552	41	2,523
Amortisation, restatement	-	-	-	(39)	-	(39)
Impairment loss	-	-	-	7,328	-	7,328
Foreign exchange differences, restatement		--	-	39	-	39
Foreign exchange differences, as reported	(7)	(145)	(62)	(186)	-	(400)
At 31 December 2018	1,481	3,077	1,230	11,720	58	17,566
Amortisation	-	367	18	597	443	1,425
Impairment loss	-	-	345	195	-	540
Eliminated on disposals	-	(2)	-	-	-	(2)
Foreign exchange differences	-	-	(44)	(308)	16	(336)
At 31 December 2019	1,481	3,442	1,549	12,204	517	19,193
Carrying amount
At 31 December 2019	-	-	56	3,275	6,817	10,148
At 31 December 2018	-	367	76	3,970	3,942	8,355

Customer relationship assets are amortised over their useful economic lives estimated to be ten years. Within the carrying amount balances relate to:

· FlyerTech: $1,591k (2018: $1,835k);

· Europe Ground: $743k (2018: $1,076k); and

· Gama Aviation Hutchison Holdings Ltd: $941k (2018: $1,059k)

Licenses and brands (which include protected intellectual property) are amortised over their useful economic lives estimated to be ten years. There are no individually material items within this balance.

Commence operations and part 145 approvals are legacy intangible balances comprising internally generated costs relating to new operations. These assets were previously identified as having an indefinite useful life. In 2018, management reassessed the remaining useful lives of the existing commence operations assets to be one year and the carrying values in 2019 are $nil (2018: $367k)

Computer software costs comprise internally developed software costs arising in the Group's MyAirOps Software Limited business as well as purchased software, such as operational and financial systems. All costs are amortised over their useful economic lives estimated to be between three and five years. The carrying value of internally developed software within this balance is $5,310k (2018: $3,199k).

The recoverable value of intangible assets has been assessed as part of the Group's annual IAS 36 impairment review. There is an impairment of $540k in the current year (2018: $7,328k). The impairment of acquired customer relationship intangibles in the prior year includes an impairment of $2,793k on GAHH in the Asia Air CGU and $4,535k in Europe Air CGU. Intangible assets recognised on acquisition in the year of $540k have been allocated to the US Ground CGU and subsequently impaired. The acquired intangibles of $4,202k in the prior year were allocated to the Asia Air CGU.

16. Property, plant and equipment

	Leasehold improvements $'000	Aircraft hull and refurbishments $'000	Fixtures, fittings and equipment $'000	Motor vehicles $'000	Asset under construction $'000	Total $'000
Cost
At 1 January 2018	13,424	7,875	5,949	1,407	884	29,539
Additions	1,494	106	1,762	1,132	931	5,425
Acquisitions	5	207	14	23	-	249
Exchange differences	(665)	(443)	(108)	(12)	-	(1,228)
At 31 December 2018 (restated*)	14,258	7,745	7,617	2,550	1,815	33,985
Additions	752	1,098	2,323	177	10,703	15,053
Acquisitions	-	-	120	-	-	120
Capitalised interest	-	-	-	-	122	122
Disposals	(191)	-	(722)	-	-	(913)
Exchange differences	483	299	178	8	274	1,242
At 31 December 2019	15,302	9,142	9,516	2,735	12,914	49,609
Accumulated depreciation
At 1 January 2018	3,794	1,383	3,717	594	-	9,488
Charge for the year	666	476	1,087	315	-	2,544
Exchange differences	(139)	(97)	(51)	(8)	-	(295)
At 31 December 2018	4,321	1,762	4,753	901	-	11,737
Charge for the year	745	416	1,380	478	-	3,019
Disposals	(148)	-	(683)	-	-	(831)
Exchange differences	159	74	121	6	-	360
At 31 December 2019	5,077	2,252	5,571	1,385	-	14,285
Carrying amount
At 31 December 2019	10,225	6,890	3,945	1,350	12,914	35,324
At 31 December 2018 (restated*)	9,937	5,983	2,864	1,649	1,815	22,248

* Restatements are detailed in Note 2 of the notes to the financial statements

During the year the Group capitalised borrowing costs of $122k (2018: nil).

Asset under construction additions of $10,703k (2018: $931k) include:

· $8,338k (2018: nil) relating to the purchase of three Airbus H145 rotary aircraft which required modification for them to be ready for their intended use. These assets were deployed on 1 June 2020.

· $2,365k (2018: $931k) relating to the non-cancellable Build-Operate-Transfer and Service Concession agreement with Sharjah Airport Authority under which the Group is committed to construct a Business Aviation Centre ("BAC") at Sharjah Airport. The total AUC in relation to Sharjah Airport at the end of the reporting period is $4,180k (2018: $1,815k).

17. Subsidiaries

Details of the Company's subsidiaries at 31 December 2019 are as follows:

Name	Place of incorporation and operation	Proportion of voting and ownership interest	Nature of business
Aerstream Limited(1)(2)	England and Wales	100%	Non-trading
Airops Software Limited(1)	England and Wales	100%	Aviation software
Aravco Limited(1)(2)	England and Wales	100%	Non-trading
Avialogistics Limited(2)	England and Wales	100%	Dormant
Aviation Crewing Limited(2)	England and Wales	100%	Dormant
FlyerTech Limited(1)	England and Wales	100%	Airworthiness management
Gama Aviation (Asset 2)(2) Limited(1)	England and Wales	100%	Non-trading
Gama Aviation (Engineering) Limited(1)	England and Wales	100%	Aviation design and engineering
Gama Aviation Group Limited(1)	England and Wales	100%	Non-trading
Gama Aviation (Training) Limited(2)	England and Wales	100%	Non-trading
Gama Aviation (UK) Limited(1)	England and Wales	100%	Aviation management
GA 259034 Limited(1)	England and Wales	100%	Dormant
Gama (Engineering) Limited(1)	England and Wales	100%	Dormant
GA FM54 Limited(1)(2)	England and Wales	100%	Non-trading
Gama Group Limited	England and Wales	100%	Holding company
Gama Leasing Limited(1)	England and Wales	100%	Aviation management
Gama Support Services Limited(1)	England and Wales	100%	Dormant
Hangar8 AOC Limited(2)	England and Wales	100%	Non-trading
Hangar8 Engineering Limited	England and Wales	100%	Non-trading
Hangar8 Management Limited	England and Wales	100%	Non-trading
Infinity Flight Crew Academy Limited	England and Wales	100%	Dormant
International JetClub Limited(2)	England and Wales	100%	Non-trading
Ronaldson Airmotive Limited(1)(2)	England and Wales	100%	Dormant
Aviation Beauport Holdings Limited(1)	Jersey	100%	Dormant
Ferron Trading Limited(1)	Jersey	100%	Dormant
Gama Aviation (Beauport) Limited(1)	Jersey	100%	Aviation management
Gama Aviation (Engineering) Jersey Limited(1)	Jersey	100%	Aviation design, engineering & FBO
Gama Aviation SA(1)	Switzerland	100%	Aviation management
Gama International Saudi Arabia(4)	Kingdom of Saudi Arabia	49%	Aviation management
Gama Aviation FZC(6)	UAE	49%	Aviation management
Gama Group Mena FZE	UAE	100%	Holding company
Gama Holding FZC	UAE	100%	Dormant
Gama Support Services FZE(1)	UAE	100%	Aviation design, engineering & FBO
Gama Aviation (Engineering) Inc.(1)	USA	100%	Aviation design and engineering
Gama Aviation (Management) Inc(1)	USA	100%	Aviation management
Gama Group Inc.	USA	100%	Holding company
Gama Aviation Engineering (HK)Limited(1)	Hong Kong	100%	Aviation design and engineering
Gama Aviation Hutchison Holdings Limited(1)	Hong Kong	100%	Holding company
Gama Aviation (Hong Kong) Limited(1)	Hong Kong	100%	Aviation management
Gama Group (Asia) Limited	Hong Kong	100%	Holding company
Star-Gate Aviation (Proprietary) Limited	South Africa	100%	Holder of South African AOC
Hangar8 Nigeria Limited(3)	Nigeria	100%	Applicant of Nigerian AOC
Hangar8 Mauritius Limited	Mauritius	100%	Holding company
GB Aviation Holdings LLC(5)	USA	50%	Joint Venture-Holding company for aviation management and charter company
Gama Hutchinson Aviation Technical Service (Beijing) Limited	China	100%	Non-trading

Notes:

⁽¹⁾ indicates indirect holding

⁽²⁾ For the year ending 31 December 2019, the below companies were exempt from the requirements to obtain an audit under section 479A of the Companies Act 2006 relating to the audit of individual financial statements by parental guarantee. Gama Aviation plc has indirect holdings in these subsidiaries undertaken:

· Aerstream Limited, company number 05584987

· Aravco Limited, company number 01316174

· Aviation Crewing Limited, company number 07693698

· GA FM54 Limited, company number 08512887

· Gama Aviation (Asset 2) Limited, company number 08586412

· Gama Aviation (Training) Limited, company number 09234102

· Hangar8 AOC Limited, company number 07198577

· International JetClub Limited, company number 03538780

· Ronaldson Airmotive Limited, company number 06391499

⁽³⁾ The consolidated financial statements include amounts relating to Hangar8 Nigeria Limited, a company established in Lagos, Nigeria. The Group holds 11% of the share capital, of which 7% is owned through a wholly owned subsidiary, Hangar8 Mauritius Limited. Whilst the Group therefore does not have legal control of this entity, the directors and officers comprise only of management from the Group who have the ability to adopt, amend and control the operating and financial policies of the entity. Local regulations prevent the Group holding a legally controlling shareholding and therefore 89% of the share capital is held on behalf of the Group by Tinubu Investment Company Limited. Accordingly, the entity has been treated as a wholly owned subsidiary in these financial statements.

⁽⁴⁾ The consolidated financial statements also include amounts relating to Gama International Saudi Arabia ("GISA"), a company established in The Kingdom of Saudi Arabia. In the Group's interim reporting for 2019 (published in September 2019) the Group consolidated GISA and re-stated prior period balances accordingly. No non-controlling interest has been recognised on the remaining 51%, as the Group has the full beneficial interest. Further details on the restatement of GISA are shown in note 2.

⁽⁵⁾ GB Aviation Holdings LLC is the entity jointly held with Signature Aviation plc. The company's sole asset is its 49% investment in Gama Aviation LLC, the Group's US Air associate. The Group's ownership interest in Gama Aviation LLC is 24.5%.

⁽⁶⁾ Gama Aviation Plc holds a 49% shareholding in Gama Aviation FZC. The results of Gama Aviation FZC are fully consolidated within the financial statements because Gama Aviation Plc is exposed to variable returns from its involvement and has the ability to affect the returns through its power over these companies. Refer to Note 26 for further details.

18. Investments accounted for using the equity method

Details of the Group's investments accounted for using the equity method at 31 December 2019 are as follows:

Name	Investment	Place of incorporation and operation	Proportion of ownership interest	Proportion of voting power held
Gama Aviation LLC	Associate	USA	24.5%	25.0%
China Aircraft Services Limited	Associate	Hong Kong	20.0%	20.0%

* Refer to note 34 for events after the reporting date, where this investment was disposed.

Details of the Group's investments accounted for using the equity method at 31 December 2018 are as follows:

Name	Investment	Place of incorporation and operation	Proportion of ownership interest	Proportion of voting power held
Gama Aviation LLC	Associate	USA	24.5%	25.0%
Gama Aviation Hutchison Holdings Ltd*	Joint venture	Hong Kong	100.0%	100.0%
China Aircraft Services Limited	Associate	Hong Kong	20.0%	20.0%

* Until 2 March 2018 when the remaining 50.0% of the company not already owned by the Group was acquired

On 2 March 2018 the Group acquired the remaining 50.0% of Gama Aviation Hutchison that it did not already own. This transaction resulted in the Group obtaining control of Gama Aviation Hutchison, and the results of that company have been consolidated from the date of the transaction. On the same date the Group acquired a 20.0% ownership interest in China Aircraft Services Limited from Hutchison Whampoa (China) Limited. Consideration paid for the interest was $16,000,000 which was settled in cash. No equity accounting has been made for the two months prior to acquisition.

On the balance sheet at 31 December 2019, the equity accounted investment in Gama Aviation LLC has been presented in current assets, as assets held for sale, as completion of the transaction was considered highly probable at 31 December 2019. Refer to Note 34 for further details on the disposal.

Management previously judged that at 31 December 2018 the Group did not control Gama International Saudi Arabia ("GISA"), which management believe operates on an arm's length basis. As communicated in the interim results for the six months to 30 June 2019, the results of GISA, following the correction of an accounting assessment under IFRS 10, have been consolidated. Investments accounted for using the equity method have not been restated to recognise GISA as an associate and then effect the related restatement for consolidation. There has been no change to the legal status or ownership of that entity.

The results of the equity accounted investments are as follows:

	Gama Aviation LLC		CASL
	Year ended 2019 $'000	Year ended 2018 $'000	Year ended 2019 $'000	Year ended 2018 $'000
Revenue	436,520	428,865	62,985	65,210
Expenditure	(434,323)	(427,826)	(61,033)	(63,958)
Profit before tax	2,197	1,039	1,952	1,252
Income tax credit	(84)	428	(282)	(219)
Profit after tax	2,113	1,467	1,670	1,033
Group's share of net profit	518	359	334	207
Finalisation and reversal of prior year pre-acquisition loss	-	-	66	-
Share of results from equity	518	359	400	207

The Group tested CASL for impairment, using a recoverable amount measured at the value-in-use ("VIU") by discounting the future expected cash flows.

Given uncertainty regarding the speed and extent of recovery of the global aviation sector following the Covid-19 pandemic the VIU calculations are based on estimated future pre-tax cash flows, derived from recent business projections submitted to the board for review and approval, and a 1.9% (2018: 1.7%) terminal growth rate thereafter.

A pre-tax discount rate of 10.1% has been used and is calculated by reference to the weighted average cost of capital ("WACC").

The sensitivity analysis showed that

· The terminal growth rate of 1.9% would need to reduce to less than zero for an impairment

· The discount rate would have to increase from 10.1% to 11.8% prior to any impairment.

Considering the sensitivity to changes in assumptions and noting that the recoverable amount exceeds the carrying amount, no impairment has been recognised.

The summary financial positions of the equity accounted investments are as follows:

	Gama Aviation LLC		CASL
	Year ended 2019 $'000	Year ended 2018 $'000	Year ended 2019 $'000	Year ended 2018 $'000
At 1 January	2,080	1,721	16,207	-
Acquisition	-	-	-	16,000
Additional paid in capital	-	893	-	-
Other comprehensive income	-	-	36	-
Share of net profit	518	359	400	207
Dividends declared	-	-	(1,276)	-
Prior year dividend	-	-	(255)	-
Impairment	-	(893)	-	-
Transfer to assets held for sale	(2,598)	-	-	-
At 31 December	-	2,080	15,112	16,207

The CASL dividends declared of $1,531k are unpaid at 31 December 2019 and included in amounts receivables from associates in Note 20.

The summary financial positions of the equity accounted investments are as follows:

	Gama Aviation LLC		CASL
	Year ended 2019 $'000	Year ended 2018 $'000	Year ended 2019 $'000	Year ended 2018 $'000
Total assets	38,175	38,985	87,216	82,952
Total liabilities	(26,948)	(29,914)	(18,257)	(9,601)
Net assets/(liabilities)	11,227	9,071	68,959	73,351
Group's share of net assets/(liabilities)	2,751	2,222	13,792	14,670
Goodwill	751	751	1,320	1,320
Impairment	(904)	(893)	-	-
Transfers	-	-	-	217
Transfer to assets held for sale	(2,598)	-	-	-
At 31 December	-	2,080	15,112	16,207

19. Inventories

	2019 $'000	2018 Restated* $'000
Raw materials and consumables	7,182	6,750
Work in progress	89	488
	7,271	7,238

* Restatements are detailed in Note 2 of the notes to the financial statements  

The directors consider that the carrying value of inventories is approximately equal to their fair value. The cost of inventories recognised as an expense was $30,706k (2018: $20,380k), this includes an amount of $2,364k resulting from a write down of inventories (2018: write back of $1,107k). $626k (2018: nil) of the write down of inventories is shown in Note 6 as an exceptional item. The remaining write down comprises $1,394k in Europe Ground and $344k in US Ground to measure inventories at the lower of cost or net realisable value. Included within inventories is an inventory obsolescence allowance of $5,413k (2018: $3,049k)

20. Trade and other receivables  

	2019 $'000	2018 Restated* $'000
Financial assets
Amount receivable for the sale of services	36,044	28,253
Loss allowance	(3,896)	(3,198)
	32,148	25,055
Amounts due from associates	4,265	2,654
Accrued income	28,387	21,059
Other debtors	-	1,892
Financial assets	64,800	50,660
Non-financial assets
Prepayments	12,384	7,865
Other debtors	713	308
Total trade and other receivables	77,897	58,833
Current	73,505	58,833
Non-current	4,392	-
Total trade and other receivables	77,897	58,833

*Restatements are detailed in Note 2 of the notes to the financial statements  

Trade receivables

Trade receivables disclosed above are classified as loans and receivables and are therefore measured at amortised cost.

The average Days Sales Outstanding ('DSO') is 55 days (2018: 44 days) due to receivables past due under 90 days increasing year on year by $6,408k. Credit controls prior to granting credit and DSO are being actively monitored by management. Where appropriate, the Group assesses the potential customer's credit quality and requests payments on account, as a means of mitigating the risk of financial loss from defaults. No interest is charged on overdue receivables (2018 - nil). The Group recognises a loss allowance on a customer by customer basis, based on an analysis of the counterparty's current financial position, against its current overdue debt.

Of the trade receivables balance at the end of the year, $5,602k (2018: $3,800k) is due from the Group's largest

5 customers by revenue, which comprise 17% (2018: 15%) of the trade receivables balance at the year-end.

Trade receivables disclosed above include amounts (see below for aged analysis) which are past due at the reporting date but against which the Group has not recognised a specific loss allowance because there has not been a significant change in credit quality and the amounts are still considered recoverable. However, the Group carries an expected credit loss allowance of $209k (2018: $419k). As permitted by IFRS 9, Group companies are required to use a provision matrix as a practical expedient to calculate the provision for expected credit losses for trade receivables without a significant financing component. No loss allowance is carried for accrued income and other debtors.

Ageing of unimpaired receivables

	2019 $'000	2018 $'000
Not yet due	12,747	10,869
Less than 30 days	5,283	3,568
30-60 days	7,271	3,624
61-90 days	1,985	938
91-120 days	736	857
Greater than 120 days	4,126	5,188
Total	32,148	25,044

Amounts due from associates

Amounts due from associates of $4,265k (2018: $2,654k) represent balances arising in the ordinary course of business between the Group and its associate companies, China Aircraft Services Limited and Gama Aviation LLC. Amounts due to associates of $4,363k (2018: $3,067k) (see note 24) also arise in the ordinary course of business between the Group and the same two associate companies. The net payable to associates of $98k is expected to be settled in the next twelve months and represents:

· A receivable due to the Group of $782k from Gama Aviation LLC; and

· A payable due from the Group of $880k to China Aircraft Services Limited.

Movement in the allowance for doubtful debts

	2019 $'000	2018 $'000
At 1 January	3,198	2,968
Opening IFRS 9 adjustment	-	327
Impairment losses recognised in income statement	2,387	965
Amounts written off as uncollectible	(1,835)	(780)
Amounts recovered during the year	-	(131)
Foreign exchange translation gains and losses	146	(151)
At 31 December	3,896	3,198

In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date.

Ageing of impaired trade receivables

	2019 $'000	2018 $'000
< 30 days	663	264
30-60 days	30	60
61-90 days	30	47
91-120 days	356	498
121+ days	2,817	2,329
Total	3,896	3,198

The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.

No security is taken on trade receivables.

21. Borrowings

			2019 $'000		2018 Restated* $'000
Secured borrowings at amortised cost
Other loans			1,475		3,056
Bank borrowings			44,767		9,466
			46,242		12,522
Total borrowings
Other loans			848		1,669
Bank borrowings			44,767		9,466
Amount due for settlement within 12 months			45,615		11,135
Other loans			627		1,387
Bank borrowings			-		-
Amount due for settlement after 12 months			627		1,387
Analysis of borrowings by currency:	Sterling $'000	US Dollars $'000		Euros $'000		Total $'000
31 December 2019
Other loans	-	1,475		-		1,475
Bank borrowings	23,072	8,235		13,460		44,767
	23,072	9,710		13,460		46,242
31 December 2018 (restated)
Other loans	-	3,056		-		3,056
Bank borrowings	9,466	-		-		9,466
	9,466	3,056		-		12,522

*Restatements are detailed in Note 2 of the notes to the financial statements  

The other principal features of the Group's borrowings are as follows.

2019

(i)  Other loans are secured by assets. Interest arises at an average of 6.1% (2018: 5.4%)

(ii)  Bank borrowings in 2019 of $44,767k (2018: $9,466k) comprise of drawdowns from a revolving credit facility with a repayment term of less than 1 year and which carries an interest rate of LIBOR + 0.94% (2018: LIBOR + 1.90%). This facility was obtained on 14 November 2019 and replaces the facility previously held. A letter of awareness has been provided by CK Hutchison Holdings Ltd (CKHH), who has an indirect shareholding of 29.8% in the Group, that CKHH's current intention, while any amount is outstanding under the facility, is not to reduce it's shareholding in the Group below 25.0% without consent from the lender or discharge of the facility. No legal implications are imposed on CKHH. The revolving credit facility is $50,000k, and $5,233k was undrawn at the end of the reporting period. Refer to note 34 for details of Helicopter finance that was secured after the reporting date.

(iii)  Loan arrangement fees of $265k (2018: $384k) have been capitalised against borrowings. During the year the Group replaced its revolving credit facility and arrangement fees on the old facility of $398k (2018: nil) have been written off, as shown in note 10.

22. Deferred tax

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting period.

	Non-deductible acquired intangibles $'000	Fixed asset temporary differences $'000	Tax losses $'000	Total $'000
At 1 January 2018	-	(1,715)	2,855	1,140
Acquisitions	(693)	-	-	(693)
Charge in year, as reported (note 11)	-	(36)	(74)	(110)
Credit in year, restatement on restated loss for the year*	-	-	511	511
Credit in year, restatement on impairment of acquired intangible*	461	-	-	461
Credit/ (charge) in year, reclassification restatement*	-	1,364	(1,364)	-
Exchange differences	-	(2)	(2)	(4)
At 31 December 2018*	(232)	(389)	1,926	1,305
Acquisitions	(139)	-	-	(139)
Credit / (charge) in year (note 11)	371	(440)	303	234
Exchange differences	-	10	23	33
At 31 December 2019	-	(819)	2,252	1,433

*Restatements are detailed in Note 2 of the notes to the financial statements  

Non-deductible acquired intangibles represent the value of the deferred tax liability which arises on the fair value of acquired intangibles which are not deductible for tax purposes. The liability is valued at the tax rate applicable to the jurisdiction where the intangibles are located.

Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so. The following is the analysis of the deferred tax balances for financial reporting purposes:

	2019 $'000	2018 Restated*  $'000
Deferred tax asset	2,252	1,926
Deferred tax liability	(819)	(621)
Net deferred tax asset	1,433	1,305

*Restatements are detailed in Note 2 of the notes to the financial statements  

The Group has not recognised a deferred tax asset in respect of losses brought forward of $5,336k (2018: $3,009k) because the future recoverability of the asset is uncertain. Tax losses include $3,723k (2018: $2,098k) in UK entities, $580k (2018: $580k) in US entities and $988k (2018: $291k) in Hong Kong.

The Group are able to recognise the deferred tax asset on tax losses of $2,252k (2018: $1,926k) and its expected utilisation in future periods based on future profitable projections for that entity in which the deferred tax asset arose.

23. Obligations under finance leases

The Group leases many assets including property, aircraft, vehicles, fixtures, fittings and equipment. Information about leases for which the Group is a lessee is presented below.

Right-of-use Assets

	Leasehold property $'000	Fixtures, fittings and equipment $'000	Aircraft $'000	Vehicles $'000	Total $'000
Cost
Balance at 1 January 2019	50,621	70	18,465	126	69,282
Additions	-	-	-	73	73
Exchange differences	975	2	653	6	1,636
At 31 December 2019	51,596	72	19,118	205	70,991
Accumulated Depreciation
Balance at 1 January 2019	-	-	-	-	-
Charge for the year - admin expenses	671	46	-	37	754
Charge for the year - cost of sales	5,189	-	9,927	36	15,152
Impairment	2,341	-	-	-	2,341
Exchange differences	69		358	2	429
At 31 December 2019	8,270	46	10,285	75	18,676
Net Book Value at 31 December 2019	43,326	26	8,833	130	52,315

Lease liabilities

Maturity analysis - contractual undiscounted cash flows

	2019 $'000
Less than one year	14,972
One to five years	23,835
More than five years	38,173
Total undiscounted lease liabilities at 31 December	76,980
Lease liabilities included in the statement of financial position at 31 December
Discounted lease liabilities	12,527
Accruals for lease payments	3,839
Current	16,366
Non-current	43,838
Total lease liabilities at 31 December	60,204

Amounts recognised in profit and loss

	2019 $'000
Depreciation charge of right of use assets
Leasehold Property	5,860
Fixtures, fittings and equipment	46
Aircraft	9,927
Vehicles	73
Total	15,906

Expenses relating to short term leases total $1,681k. There are no expenses relating to low value assets or expenses relating to variable lease payments.

Impact on profit and loss

	2019 $'000
Operating lease expense reversal in cost of sales	15,343
Depreciation charge on right of use assets	(15,152)
Impact on Gross Profit	191
Operating lease expense reversal in administrative expenses	2,864
Impact on EBITDA	3,055
Depreciation charge on right of use assets	(754)
Impact on Adjusted EBIT (note 4)	2,301
Impairment losses	(2,340)
Impact on EBIT	(39)
Interest expense on lease liabilities (note 10)	(3,061)
Impact on profit and loss	(3,100)

An impairment loss of $2,340k has been recognised in relation to the right of use leased asset at Fairoaks airport. The cessation of Part 145 engineering activities necessitated vacating the leased property, which prompted an impairment assessment by the Group. The Group has deemed the recoverable amount of the property to be nil and the asset has been impaired accordingly.

Amounts recognised in the statement of cash flows

	2019 $'000
Cash generated by operating activities	14,062
Cash outflow from financing activities on leasing	(14,062)
Net impact on cash flows	-

Measurement of lease liabilities at transition

	2019 $'000
Operating lease commitments reported as at 31 December 2018	63,259
Operating lease commitments restatement	10,636
Operating lease commitments restated as at 31 December 2018	73,895
Discounted using incremental borrowing rate at date of initial application	63,571
IFRS 16 deemed leases*	7,392
Short term leases not recognised as a liability	(1,681)
Lease liability recognised as at 1 January 2019	69,282

*The right of use assets opening balance includes an amount of $7.4m relating to arrangements which are deemed to be a lease under IFRS 16. These arrangements, which relate to aircraft, were not included in the operating lease commitments disclosed in 2018.

The operating lease commitments disclosed in the prior year have been restated for a prior year error as tabulated below.

	2018 As reported $'000	2018 Restatement $'000	2018 Restated* $'000
Within one year	7,121	4,727	11,848
In the second to fifth year inclusive	17,774	5,909	23,683
After five years	38,364	-	38,364
	63,259	10,636	73,895

Average incremental borrowing rates were applied across the group were:

	%
Leasehold property	5.5
Vehicles	3.9
Fixtures, fittings and equipment	4.6
Aircraft	3.9

Property leases with a remaining lease term of more than 10 years have been adjusted to reflect the additional security afforded by the leased asset on the cost of borrowing. An asset specific adjustment of 0.69% has been applied to the rates of these leases.

In June 2017 the Group entered into a non-cancellable Build-Operate-Transfer and Service Concession agreement with Sharjah Airport Authority under which the Group is committed to construct a Business Aviation Centre ("BAC") at Sharjah Airport. The agreement runs from June 2017 until June 2042 with a ten-year extension option to June 2052. The 10-year extension has not been formalised at the date of signing the financial statements. The lease term for IFRS 16 accounting purposes has not included the 10-year extension because the option to extend is not reasonably certain. The lease liability has been discounted at an incremental borrowing rate of 7.3%. The Sharjah BAC includes a $7,339k right-of-use asset and $7,681k obligation under leases at 31 December 2019.

24.  Trade and other payables

	2019 $'000	2018 Restated* $'000
Financial liabilities
Trade and other payables	22,209	15,198
Accruals	15,958	18,399
Amounts due to associates	4,363	3,067
	42,530	36,664
Non-financial liabilities
Other taxation and social security	1,243	1,522
Income received in advance	7,823	10,410
	9,066	11,932
Total trade and other payables	51,596	48,596

*Restatements are detailed in Note 2 of the notes to the financial statements  

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average Days Payables Outstanding ('DPO') is 39 days (2018: 29 days).

No interest is charged on the trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within agreed credit terms. The directors consider that the carrying amount of trade payables approximates to their fair value.

Amounts due to associates of $4,363k represent balances arising in the ordinary course of business between the Group and its associate companies, China Aircraft Services Limited and Gama Aviation LLC. Amounts due from associates of $4,265k (see note 20) also arise in the ordinary course of business between the Group and the same two associate companies. The net payable to associates of $98k represents:

· A receivable due to the Group of $782k from Gama Aviation LLC; and

· A payable due by the Group of $880k to China Aircraft Services Limited.

25. Issued capital and reserves

	Number	GBP	$'000
Ordinary shares: authorised, issued and fully paid
At 1 January 2018	43,994,442	439,944	684
Issue of share capital	19,641,837	195,918	269
At 31 December 2018	63,636,279	635,862	953
Issue of share capital	-	-	-
At 31 December 2019	63,636,279	635,862	953

Share capital represents the amount subscribed for share capital at nominal value. The Company has one class of ordinary shares with a nominal value of £0.01 and no right to fixed income.

On 2 March 2018, 19,591,837 new ordinary shares of one pence each in Gama Aviation plc were admitted for trading on AIM.

The Company raised gross proceeds of £48,000k ($65,460k) pursuant to the placing. Hutchison Whampoa (China) Limited ("Hutchison") subscribed for shares in the placing and held 21.17% of the issued share capital at 30 June 2018. A further 50,000 shares were issued to a director of the Company.

	$'000
Share premium
At 1 January 2018	-
Issuance of shares	63,473
At 1 January 2019	63,473
Issue of new shares	-
Balance at 31 December 2019	63,473

Share premium represents the amount subscribed for share capital in excess of nominal value, net of placement fees of £1,526k or $1,987k (2018: £1,526k or $1,987k).

Other reserves

	Merger relief reserve Restated $'000	Reverse takeover reserve $'000	Other reserve $'000	Share-based payment reserve $'000	Cash Flow hedge reserve $'000	Total Restated $'000
At 1 January 2018	136,996	(95,828)	20,209	195	127	61,699
Share-based payment expense (Note 31)	-	-	-	639	-	639
Utilisation of merger reserve, as restated	(28,401)	-	-	-	-	(28,401)
Gains recognised on cash flow hedge	-	-	127	-	(127)	-
Balance at 31 December 2018*	108,595	(95,828)	20,336	834	-	33,937
Share-based payment expense (Note 31)	-	-	-	861	-	861
Balance at 31 December 2019	108,595	(95,828)	20,336	1,695	-	34,798

*Restatements are detailed in Note 2 of the notes to the financial statements  

The merger relief reserve represents differences between the fair value of the consideration transferred and the nominal value of the shares. In 2015, this occurred as a result of the reverse takeover. The reserve was increased in 2016 upon the acquisition of Aviation Beauport Limited when shares were included as part of the consideration. The impairment loss of $28,401k in 2018, has been realised against the merger reserve related to these assets.

The reverse takeover reserve represents the balance of the amount attributable to equity after adjusting the accounting acquirer's capital to reflect the capital structure of the legal parent in a reverse takeover.

Other reserve is the result of the application of merger accounting to reflect the combination of the results of Gama Aviation (Holdings) Jersey Limited with those of Gama Holding FZC, following the share for share exchange transacted on 16 December 2014.

The share-based payment reserve is used to recognise the value of equity-settled share-based payments, provided to employees, including key management personnel, as part of their remuneration. Refer to note 31 for further details of these plans.

There is an employee benefit trust that is affiliated with the Group, however the Group does not have control of this trust and as a result, the trust is not consolidated and no own share reserve is recognised.  At the end of the reporting period, there are 219,310 (2018: 219,310) shares which are held in the employee benefit trust. The fair value of these shares is £138k (2018: £263k).

Cash flow hedge reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective in cash flow hedges.

26. Non-controlling interest

	$'000
Balance at 1 January 2018	1,524
Restatement*	(882)
Total comprehensive profit attributable to minority interests	14
Balance at 31 December 2018	656
Total comprehensive profit attributable to minority interests	95
Balance at 31 December 2019	751

*Restatements are detailed in Note 2 of the notes to the financial statements

The non-controlling interest in the current and prior year relates to a 49% shareholding in Gama Aviation FZC, which is consolidated as there is an 80% profit sharing ratio attributable to the Group. As a result, a 20% non-controlling interest has been recognised in the current and prior year. In addition, the Group has a call option on the remaining shareholding.

27. Net cash generated by operating activities

	2019 $'000	2018 Restated* $'000
Loss before tax from continuing operations	(10,964)	(34,155)
Loss before tax from discontinued operations	-	(767)
Loss before tax	(10,964)	(34,922)
Adjustments for:
Finance income (note 9)	(695)	(586)
Finance costs (note 10)	4,657	954
Depreciation of property, plant and equipment (note 16)	3,019	2,544
Depreciation of right-of-use assets in administrative expenses (note 23)	754	-
Depreciation of right-of-use assets in cost of sales (note 23)	15,152	-
Amortisation of intangible assets (note 15)	1,425	2,484
IAS 36 impairment of right-of-use assets (note 23)	2,341	-
IAS 36 impairment of goodwill and acquired intangibles (note 15)	540	28,401
Profit arising on step acquisition	-	(986)
Loss on disposal of property, plant and equipment	82	-
Share of profit of associate and joint venture (note 18)	(918)	(566)
Share-based payment (note 31)	861	639
Operating cash inflow before movements in working capital	16,254	(2,038)
Unrealised foreign exchange movements	226	(3,171)
Increase in gross inventories	(2,397)	3,574
Increase in inventory obsolescence (note 19)	2,364	(1,107)
Increase in gross receivables	(21,451)	(5,862)
Increase in loss allowance for receivables (note 20)	2,387	834
Increase/ (decrease) in payables	3,000	(12,832)
(Decrease)/increase in deferred revenue	1,189	1,843
Increase/(decrease) in provisions	1,115	-
Cash generated by/ (expended on) operations	2,687	(18,759)
Taxes paid	(992)	(1,633)
Net cash expended on by operating activities	1,695	(20,392)

*Restatements are detailed in Note 2 of the notes to the financial statements  

28. Net Debt & changes in liabilities arising from financing activities

Net Debt

A reconciliation of the IFRS financial statement line items that represent the Net Debt APM is tabulated below.

	2019 $'000	2018 Restated* $'000
Cash	8,463	10,045
Borrowings	(46,242)	(12,522)
Net debt pre-IFRS 16	(37,779)	(2,477)
Obligations under leases	(60,204)	-
Net Debt	(97,983)	(2,477)

*Restatements are detailed in Note 2 of the notes to the financial statements

Changes in liabilities arising from financing activities are tabulated below.

	Borrowings		Obligations under leases		Total $'000
	Long-term $'000	Short-term $'000	Long-term $'000	Short-term $'000
At 1 January 2018	1,012	35,656	2,013	1,654	40,335
Repayments	(966)	(34,714)	-	(1,654)	(37,334)
Proceeds	-	10,304	-	-	10,304
Non-cash movements	(46)	(1,396)	86	957	(399)
As reported 1 January 2019	-	9,850	2,099	957	12,906
Restatement - classification of finance leases*	-	3,056	(2,099)	(957)	-
Restatement - classification of arrangement fees*	-	(384)	-	-	(384)
As restated 1 January 2019*	-	12,522	-	-	12,522
Cash flows:
Repayments	-	(32,915)	-	-	(32,915)
Proceeds	-	65,563	-	-	65,563
Non-cash:
Initial application of IFRS 16	-	-	43,838	16,366	60,204
Reclassification	627	(627)	-	-	-
Foreign currency translation on borrowings in profit or loss (note 9)	-	(693)	-	-	(693)
Exchange differences	-	1,411	-	-	1,411
Arrangement fee on old facility written off	-	398	-	-	398
Arrangement fee movement on new facility		(93)			(93)
Other non-cash movements	-	49	-	-	49
At 31 December 2019	627	45,615	43,838	16,366	106,446

*Restatements are detailed in Note 2 of the notes to the financial statements  

The assets associated the finance lease restatement are included in Note 16 and relate to aircraft hull and refurbishments, and motor vehicles.

29. Contingent liabilities

The Group was previously involved in legal proceedings relating to historic Hangar 8 trading activity prior to the merger in January 2015 and relating to disputes with SPC Aviation Limited. The Company reached an agreement with SPC Aviation Limited to settle the legal proceedings between the parties on 9 December 2019 under the terms of a settlement agreement which was in full and final settlement of the court proceedings between the parties.

Following the settlement of the disputes with SPC Aviation Limited, the remaining proceedings in which the Company and a number of its subsidiaries are parties relate to disputes where the Company and its subsidiaries are claimants. The Company has issued proceedings to recover long-standing trade receivables that amount to approximately $3m. The Company has made adequate provisions against these claims and as a result the Board does not expect any further provisions will be required. In addition, based on legal advice, the Board considers the proceedings to recover these receivables are likely to be successful, noting that the Company has already obtained summary judgments for a portion of these claims in the sum of $2,430k.

30. Provisions for liabilities

	2019 $'000	2018 $'000
At 1 January	-	-
Charged to the income statement during the year	1,067	-
Utilised during the year	(503)	-
Foreign Exchange	24	-
Discounting (Note 10)	35	-
Transferred from accruals	492	-
At 31 December	1,115	-
Amount due for settlement within 12 months	521	-
Amount due for settlement after 12 months	594	-
Total provisions	1,115	-

The closing provision as at 31 December 2019 includes a closure provision of $620k (2018: nil), a dilapidations provision of $50k (2018: $49k) and an employee's end of service indemnity provision of $443k (2018: $443k).

The closure provision relates to the cessation of the Groups business activities at Fairoaks airport and the associated unavoidable costs. The obligation under leases (see note 23), contains the related lease liability.

During the year the Group recognised redundancy provisions of $128k. This provision relates to the cessation of the Groups business activities at Fairoaks airport. The full provision was utilised during the year.

Provision for employees' end of service indemnity is made in accordance with the U.A.E. labour laws and is based on current remuneration and cumulative years of service at the reporting date.

31. Share-based payments

Equity-settled share option scheme

Options were granted on 17 June 2019 to certain employees of the Group. Options are exercisable at a price equal to £0.92. The vesting period is 3 years. If options remain unexercised after a period of 10 years from the grant date, the options expire. Options are forfeited if the employee leaves the Group before the options vest.

Options were granted on 22 June 2018 to certain employees of the Group. Options are exercisable at a price equal to £2.06. The vesting period is 2-3 years. If options remain unexercised after a period of 10 years from the grant date, the options expire. Options are forfeited if the employee leaves the Group before the options vest.

Details of the options outstanding during the year are:

	2019 '000	2018 Restated* '000
At 1 January	2,731	1,310
Granted during the year	1,226	2,132
Forfeited during the year	(210)	(711)
At 31 December	3,747	2,731
Exercisable at 31 December	670	-

*Restatements are detailed in Note 2 of the notes to the financial statements  

The estimated fair values of the options granted is $465,880 (2018: $3,047,216).

The inputs into the Black-Scholes model are as follows:	2019	2018
Share price, US$ cents	92.50	207.50
Exercise price, US$ cents	91.50	205.50
Expected volatility	41.19%	37.49%
Expected life, years	6.5	10
Risk-free rate	0.72%	1.26%
Expected dividend yields	2.16%	1.30%

Expected volatility was determined by calculating the historical volatility of the Group's share price over a historical 6.5 year period prior to grant. The Group recognises total expenses of $861k (2018: $639k) related to equity settled share-based payment transactions in 2019.

32. Retirement benefit schemes

The Group operates defined contribution retirement benefit schemes for all qualifying employees. The assets of the schemes are held separately from those of the Group in funds under the control of independent trustees. As at 31 December 2019, contributions of $259,000 (2018: $156,000) due in respect of the current reporting period had not been paid over to the schemes.

33. Deferred revenue

	2019 $'000	2018 $'000
Deferred revenue	7,420	6,231

Current	2,867	6,231
Non-current	4,553	-
Total	7,420	6,231

* Restatements are detailed in Note 2 of the notes to the financial statements  

The deferred revenue arises in respect of management fees and maintenance contracts invoiced in advance both of which are expected to be settled in the next twelve months, with the exception of non-current balances which are expected to be recognised in twelve to thirty months.

34. Events after the balance sheet date

Airops Software ("myairops") secures $2.5m software sale

On 10 March 2020 the Group announced that the Global Services subsidiary Airops Software Ltd (trading as myairops) has secured a $2.5m Software as a Service (SaaS) contract with one of the world's largest business aviation operators. The system is live and provides comprehensive fleet management, crew rostering and maintenance planning capabilities in support of a large fleet operation. The three-year contract is the largest single deal yet signed by myairops, following a substantial investment in its SaaS platform by the Group.

Sale of US Air associate

On 2 March 2020 the Group announced the sale of its US Air associate, Gama Aviation LLC (doing business as "Gama Aviation Signature") to Wheels Up Partners Holdings LLC ("Wheels Up"). Gama Aviation Signature is owned 49% by GB Aviation Holdings LLC, a joint venture between the Group and Signature Aviation Plc, with the remaining 51% held by the Group's US partners.

Gama Aviation will receive consideration of $33m, comprising $10m in return for its 24.5% equity interest and $23m for accelerated branding fees and other trading related considerations. $13m of the total purchase consideration is to be paid in cash at closing, with the remaining $20m to be paid in cash, with interest, in eight equal six-month instalments over the next four years. The transaction is expected to be accretive to underlying earnings to FY2020 and FY2021 as well as resulting in a one-off profit on disposal of the equity interest.

As part of the transaction, GB Aviation Holdings LLC has licensed the continued use of the Gama Aviation Signature brand for up to two years. The Group has additionally entered into a five year non-compete agreement with Wheels Up in respect of its FAA Part 135 charter operations in the USA.

On the balance sheet at 31 December 2019, the equity accounted investment in the US Air associate has been presented in current assets, as assets held for sale , as completion of the transaction was considered highly probable at 31 December 2019.

Helicopter and financing update

On 13 February 2020 the Group announced an update on its £20m order for three Airbus H145 helicopters, as reported on 24 December 2018. The Company has completed this purchase and taken title to all three helicopters. Deployment of the helicopters on 1st June 2020 in support of a long-term contract proceeded to plan.

The purchase was funded through a new £20m term loan secured with HSBC on competitive terms (the "Loan"). The Loan is separate from the Group's $50m revolving credit facilities (the "RCF") which was transferred from RBS to HSBC on improved terms last November. The Loan and the RCF (collectively the "Facilities") are subject to customary banking security arrangements.

COVID-19

In light of the escalating COVID-19 pandemic, the Group has considered whether any adjustments are required to reported amounts in the financial statements. The Group notes that as at 31 December 2019 no pandemic had been declared and as a result, COVID-19 has been treated as a non-adjusting event. Given the continuing operational and financial uncertainties resulting from the COVID-19 pandemic, the Group has provided a number of announcements on the impacts of COVID-19 and financial guidance for the year ending 31 December 2020 remains suspended. The only area identified to date that could be impacted by COVID-19 in 2020 relates to potential impairment of non-current assets.

Change in UK tax rate

In the Spring Budget 2020, the Government announced that from 1 April 2020 the corporation tax rate would remain at 19% (rather than reducing to 17%, as previously enacted). This new law was substantively enacted on 17 March 2020. As the proposal to keep the rate at 19% had not been substantively enacted at the balance sheet date, its effects are not included in these financial statements.

35. Capital Commitments

Capital expenditure contracted for but not provided in the financial statements:

	2019 $'000	2018 $'000
Property, Plant and Equipment	13,509	29,483

On 21 December 2018 the Group entered into cancellable commitments to purchase three Airbus H145 rotary aircraft. At the end of 2019 the Group had outstanding contracted commitments of $13,395k relating to the airframes and associated modifications of two of these aircraft. On 13 February 2020 the Group announced an update on its £20m order for three Airbus H145 helicopters, as reported on 24 December 2018. The Company has completed this purchase and taken title to all three helicopters. Deployment of the helicopters occurred on 1 June 2020 in support of a long-term contract.

In June 2017 the Group entered into a non-cancellable Build-Operate-Transfer and Service Concession agreement with Sharjah Airport Authority under which the Group is committed to construct a Business Aviation Centre ("BAC") at Sharjah Airport. The agreement runs from June 2017 until June 2042 with a ten-year extension option to June 2052. The 10-year extension has not been formalised at the date of signing the financial statements . At the end of 2019 the Group had outstanding contracted commitments of $114k.

36. Dividends

	2019 $'000	2018 $'000
Final dividend paid of 2.0p per share (2018: 2.75p)	1,620	2,306

Given the desirability of conserving cash during the ongoing COVID-19 pandemic, the Board does not recommend a dividend for 2019 (2018: 2.0 pence per share).

Following the filing of interim accounts with Companies House, the directors are satisfied that all legal requirements in respect of the final dividend in respect of 2018, which was paid in July 2019, have been met.

 

END

 

 

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